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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K



|[X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934[Fee Required]
|--- | --------------------------------------------------------------------------------------------------

For the Fiscal Year Ended December 31, 2001

OR



|[   ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934[No Fee Required]
|----- | ---------------------------------------------------------------------------------------------------------

For the Transition Period From __________________ To __________________
 Commission File Number 0-26960

ITLA CAPITAL CORPORATION

(Exact Name of Registrant as Specified in its Charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 95-4596322                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)

|                                                     |  |           
|---------------------------------------------------- |  | ----------
|888 Prospect Street, Suite 110, La Jolla, California |  | 92037     
|(Address of Principal Executive Offices)             |  | (Zip Code)

Registrants Telephone Number, Including Area Code: (858) 551-0511
 
Securities Registered Pursuant to Section 12(b) of the Act:None
 
Securities Registered Pursuant to Section 12(g) of the Act:Common Stock, $.01 Par Value
(Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.   Yes  X    No.

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the Registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  [X]

As of March 22, 2002, there were issued and outstanding 5,805,292 shares
of the Registrants Common Stock. The aggregate market value of the voting
stock held by non-affiliates of the Registrant, computed by reference to the
closing price of such stock as of March 22, 2002, was $138.2 million. (The
exclusion from such amount of the market value of the shares owned by any
person shall not be deemed an admission by the Registrant that such person is
an affiliate of the Registrant.)



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TABLE OF CONTENTS



|           |                                                                                               |  |  |  |  |  |  | 
|---------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I    
|           | Item 1. Business                                                                             
|           | Item 2. Properties                                                                           
|           | Item 3. Legal Proceedings                                                                    
|           | Item 4. Submission of Matters to a Vote of Security Holders                                  
|PART II   
|           | Item 5. Market for Registrants Common Equity and Related Stockholder Matters                
|           | Item 6. Selected Financial Data                                                              
|           | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|           | Item 7.A. Quantitative and Qualitative Disclosures About Market Risk                         
|           | Item 8. Financial Statements and Supplementary Data                                          
|           | Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure 
|           | Item 10. Directors and Executive Officers of the Registrant                                  
|           | Item 11. Executive Compensation                                                              
|           | Item 12. Security Ownership of Certain Beneficial Owners and Management                      
|           | Item 13. Certain Relationships and Related Transactions                                      
|PART IV   
|           | Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K                     
|SIGNATURES
|EXHIBIT 21
|EXHIBIT 23
|EXHIBIT 99



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ITLA CAPITAL CORPORATION
 FORM 10-K
 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
 TABLE OF CONTENTS

|          |  |                                                                                       |  |     
|--------- |  | ------------------------------------------------------------------------------------- |  | ----
|          |  |                                                                                       |  | Page
|          |  |                                                                                       |  |     
|PART I   
|         
|Item 1.   |  | Business                                                                              |  | 3   
|Item 2.   |  | Properties                                                                            |  | 14  
|Item 3.   |  | Legal Proceedings                                                                     |  | 14  
|Item 4.   |  | Submission of Matters to a Vote of Security Holders                                   |  | 14  
|         
|PART II  
|         
|Item 5.   |  | Market for Registrants Common Equity and Related Stockholder Matters                 |  | 15  
|Item 6.   |  | Selected Financial Data                                                               |  | 16  
|Item 7.   |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 18  
|Item 7.A. |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 35  
|Item 8.   |  | Financial Statements and Supplementary Data                                           |  | 38  
|Item 9.   |  | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure  |  | 75  
|         
|PART III 
|         
|Item 10.  |  | Directors and Executive Officers of the Registrant                                    |  | 75  
|Item 11.  |  | Executive Compensation                                                                |  | 78  
|Item 12.  |  | Security Ownership of Certain Beneficial Owners and Management                        |  | 83  
|Item 13.  |  | Certain Relationships and Related Transactions                                        |  | 85  
|         
|PART IV  
|         
|Item 14.  |  | Exhibits, Financial Statement Schedules and Reports on Form 8-K                       |  | 86  

Forward-Looking Statements

Safe Harbor statement under the Private Securities Litigation Reform Act
of 1995: This Form 10-K contains forward-looking statements that are subject
to risks and uncertainties, including, but not limited to, changes in economic
conditions in our market areas, changes in policies by regulatory agencies, the
impact of competitive loan products, loan demand risks, the quality
or composition of the loan or investment portfolios, fluctuations in
interest rates and changes in the relative differences between short
and long term interest rates including levels of nonperforming
assets, and operating results and other risks detailed from time to time
in our filings with the Securities and Exchange Commission. We caution readers
not to place undue reliance on forward-looking statements. We do not undertake
and specifically disclaim any obligation to revise any forward-looking
statements to reflect the occurrence of anticipated or unanticipated events or
circumstances after the date of such statements. These risks could cause our
actual results for 2002 and beyond to differ materially from those expressed in
any forward-looking statements by, or on behalf of, us.

As used throughout this report, the terms we, our, ITLA Capital or
the Company refer to ITLA Capital Corporation and its consolidated
subsidiaries.



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PART I




Item 1. Business

General

ITLA Capital Corporation is the largest financial services company
headquartered in San Diego County, California with consolidated assets of $1.5
billion, consolidated net loans of $1.1 billion, deposits of $953.7 million and
consolidated shareholders equity of $137.9 million as of December 31, 2001.
We conduct and manage our business principally through Imperial Capital Bank
(the Bank), a $1.4 billion California industrial bank, with six offices in
California, (San Francisco, Encino, Beverly Hills, Glendale, Costa Mesa and Del
Mar). The Bank has been in business for 27 years and was formally known as
Imperial Thrift and Loan Association until its name change in January 2000.
Our branch offices are primarily used for our deposit services and lending
business. The Bank is primarily engaged in:



| |  | Originating real estate loans secured by income producing properties for retention in its loan portfolio; and                                                                                                                                        
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Accepting customer deposits through the following products: certificates of deposits, money market and passbook accounts. Our
deposit accounts are insured by the Federal Deposit Insurance
Corporation (FDIC), up to the appropriate legal limits.

During 2001, 2000 and 1999, the Bank was also engaged in the acquisition
of pools of single family mortgages in the secondary market for investment
purposes. On March 28, 2002, the Bank securitized $86.3 million of its
performing single family mortgages and sold $17.6 million of the remaining
single family mortgages in a whole loan sale.

During 2000, we acquired through our subsidiary, Imperial Capital Real
Estate Investment Trust (Imperial Capital REIT) all of the equity and certain
collateralized mortgage obligations (CMOs) of the ICCMAC Multi-family and
Commercial Trust 1999-1 (the ICCMAC Trust). On the date of acquisition, the
ICCMAC Trust held assets of $250.5 million as collateral for $205.4 million of
investment grade CMOs that had been sold to third party investors by the
previous owner. At December 31, 2001 and 2000, real estate loans held in
trust, net, for the CMOs totaled $162.2 million and $211.7 million and the
CMOs outstanding balance was $109.6 million and $161.9 million, respectively.

We continuously evaluate business expansion opportunities, including
acquisitions or joint ventures with companies that originate or purchase
commercial and multi-family real estate loans as well as other types of secured
commercial loans. In connection with this activity, we periodically have
discussions with and receive financial information about other companies that
may or may not lead to the acquisition of the company, a segment or division of
that company, or a joint venture opportunity with us in order to enhance the
value of our Company to our shareholders.

During the first quarter of 2002, the Company completed its acquisition of
Asahi Bank of California (Asahi Bank) a wholly-owned subsidiary of Asahi Bank
Ltd  Japan (ABLJ), for approximately $14.9 million. On the date of
acquisition, Asahi Bank had total assets of approximately $50 million,
including $35 million of commercial real estate and business loans and $15
million of cash and securities which were acquired by the Bank at the closing
of the transaction.

The executive offices of the Company are located at 888 Prospect Street,
Suite 110, LaJolla, California 92037 and its telephone number at that address
is (858) 551-0511.



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Real Estate Lending

General.During 2001 and 2000, we concentrated our real estate lending
activities as follows:



| |  | Originating and purchasing real estate loans secured by income producing
properties, both commercial and residential (including apartments).
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Purchasing single-family residential loans.                                                                                                 

The interest rates charged on real estate loans generally vary based on a
number of factors, including the degree of credit risk, size and maturity of
the loan, whether the loan has a fixed or a variable rate, and prevailing
market rates for similar types of real estate loans. At December 31, 2001 and
2000, the Banks gross real estate loan portfolio remained relatively unchanged
at $1.1 billion. See Item 7: Managements Discussion and Analysis of
Financial Condition and Results of Operations for additional information
regarding the composition of the portfolio at December 31, 2001 and 2000.

Marketing and Originations.We originate real estate loans through branch
offices located in San Francisco, Glendale, Costa Mesa and Del Mar. These
offices are staffed by a total of fourteen loan officers. Loan officers
solicit mortgage loan brokers for loan applications that meet our underwriting
criteria, and also accept applications directly from borrowers. A majority of
the real estate loans funded by us are originated through mortgage loan
brokers. Mortgage loan brokers act as intermediaries between us and the
property owner in arranging real estate loans and earn a fee based upon the
principal amount of each loan funded. Since a large portion of our marketing
effort is through the contact of loan officers with mortgage loan brokers, we
do not incur significant expenses for advertising our lending services to the
general public. Currently, we provide limited deposit product services to our
customers. Additionally, we do not offer a full range of banking services, and
generally do not market our lending services to, or receive loan applications
from our depositors.

Income Producing Property Loans.We originate and purchase real estate
loans secured primarily by first trust deeds on income producing properties.
Income property loans consist primarily of the following types of properties:



| |  | Apartments                                              
|- |  | --------------------------------------------------------
| 
| |  | Retail centers                                          
| 
| |  | Small office and
light industrial
buildings             
| 
| |  | Hotels                                                  
| 
| |  | Mini-storage facilities                                 
| 
| |  | Mobile home parks                                       
| 
| |  | Other mixed use or special purpose commercial
properties

At December 31, 2001, the Bank had $967.2 million of income producing
property loans outstanding representing 84.5% of its total real estate loans.
Most of the Banks real estate borrowers are business owners, individual
investors, investment partnerships or limited liability corporations. The
income producing property lending that the Bank engages in typically involves
larger loans to a single borrower and is generally viewed as exposing the
lender to a greater risk of loss than one-four family residential lending.
Income producing property values are also generally subject to greater
volatility than residential property values. The liquidation values of income
producing properties may be adversely affected by risks generally incident to
interests in real property, such as:



| |  | Changes or continued weakness in general
or local economic conditions;                                                                    
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Changes or continued weakness in specific
industry segments;                                                                              
| 
| |  | Declines in real estate values;                                                                                                           
| 
| |  | Declines in rental, room or occupancy
rates in hotels, apartment complexes or
commercial properties                                       
| 
| |  | Increases in other operating expenses
(including energy costs);                                                                           
| 
| |  | The availability of
refinancing at lower interest
rates or better loan terms;                                                             
| 
| |  | Changes in governmental
rules, regulations and fiscal
policies, including rent
control ordinances,
environmental legislation and
taxation;
| 
| |  | Increases in interest rates,
real estate and personal
property tax rates, and                                                             
| 
| |  | Other factors beyond the
control of the borrower or the
lender.                                                                           



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Income producing property loans are generally made in amounts up to 75% of
the appraised value, however, in certain instances, multifamily originations
may be made at a loan to value ratio of 80%. Loans are generally made for
terms up to ten years, with amortization periods up to 30 years. Depending on
market conditions at the time the loan was originated, certain loan agreements
may include prepayment penalties. Most real estate loans are subject to a
quarterly adjustment of their interest rate based on one of several interest
rate indexes.

As of December 31, 2001, 61.2% of the Banks real estate loan portfolio
was indexed to the Six-Month London Interbank Offered Rate; 7.6% was indexed to
the reference rate charged by Bank of America; 6.4% was indexed to the
one-month London Interbank offered rate; 2.4% was indexed to the Federal Home
Loan Bank (FHLB) 11th District Cost of Funds Index; 18.0% was fixed for an initial
period and then adjustable; 2.1% was indexed to either the United States
Treasury security indexes or the FHLB of San Francisco
advance rate; and the balance of 2.3% was fixed rate. Most of the Banks
variable rate real estate loans may not adjust downward below their initial
rate, with increases generally limited to maximum adjustments of 2% per year up
to 4% for the life of the loan. The inability of the Banks real estate loans
to adjust downward can contribute to increased income in periods of declining
interest rates, and also assists the Bank in our efforts to limit the risks to
earnings and equity value resulting from changes in interest rates, subject to
the risk that borrowers may refinance these loans during periods of declining
interest rates. At December 31, 2001, 92.8% of the Banks variable rate and
fixed/adjustable loan portfolio contained interest rate floors. The
weighted-average minimum interest rate on this portfolio was 9.0%. At that
date, 93.2% of the variable rate loans outstanding had a lifetime interest rate
cap. The weighted-average lifetime interest rate cap on this portfolio was
12.4%.

The underwriting standards for loans secured by income producing real
estate properties consider the borrowers financial resources and ability to
repay and the amount and stability of cash flow, if any, from the underlying
collateral, to be comparable in importance to the loan-to-value ratio as a
repayment source. Management believes that during 2001, both California and
the United States economy experienced an economic shock, not only resulting
from the recessionary economy and volatile interest rate environment but also
resulting from the terrorist attacks of September 11, 2001. However, even
though California and our national economy have strengthened in certain regions
and industries, the potential for a downturn of economic conditions in
California, the surrounding regions or in the national economy, or another
potential terrorist attack on the United Sates could have an adverse effect on
our real estate lending business, including reducing the demand for new loans,
limiting the ability of borrowers to pay financed amounts, and impairing the
value of our real estate collateral.

A small portion of the Banks real estate loan portfolio consists of loans
secured by junior liens on real estate. At December 31, 2001, 23 real estate
loans in the aggregate amount of $3.4 million, or less than 1% of our real
estate loan portfolio, were secured by second trust deeds. Of these loans
collateralized by junior liens, 99% were secured by income producing properties
and 1% were secured by one-four family residential properties. Of the Banks
real estate loans outstanding at December 31, 2001, $8.8 million represented
loans to facilitate the sale of other real estate owned.

In 2001, 2000, and 1999, the Bank purchased income producing real estate
loans totaling $22.6 million, $110.9 million, and none, respectively. In its
commercial real estate loan purchases, the Bank generally reserves the right to
reject particular loans from a loan pool being purchased and does so for loans
in a pool that do not meet its underwriting criteria. In determining whether
to purchase a commercial real estate loan, the Bank reviews the borrowers
financial resources and ability to repay and the amount and stability of cash
flow, if any, from the underlying collateral. Similar to its loan
originations, on commercial real estate loan purchases the Bank reviews
information concerning the income, financial condition, employment and credit
history of the applicant, however, current appraisals and borrower credit
reports are not obtained. On commercial real estate loan purchases, the Bank
reviews the original appraisal and credit report obtained by the loan seller or
originator and arranges for a staff member or an outside consultant to perform
an analysis of the loan and the value of the underlying collateral, including
on-site inspection, before purchasing the loan. For a further discussion of
the Banks underwriting procedures, see Lending, Origination, Purchasing and
Underwriting set forth below.

Construction Loans.We also originate construction loans for income
producing properties, as well as for single-family home construction. At
December 31, 2001, the Bank had $54.1 million of construction loans
outstanding, representing 4.7% of its loans receivable. In addition to the
lending risks previously discussed,



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construction loans also present risks associated with the accuracy of the
initial estimate of the propertys value upon completion compared to its actual
value, the timely completion of construction activities for their allotted
costs and the time needed to stabilize income properties or sell residential
tract developments. These risks can be affected by a variety of factors,
including the oversight of the project, localized costs for labor and
materials, and the weather.

Residential Lending.In 2001, we continued to execute the strategy
commenced in 2000 to diversify our product mix and concentration in commercial
real estate loans through the bulk purchase of single-family residential loans.
On March 28, 2002, we disposed of most of our residential loan
portfolio through the securitization of $86.3 million of single
family mortgages and the sale of $17.6 million of the remaining single family
mortgages in a whole loan sale. Under guidelines established by the Board of
Directors, the Companys purchased single family residential loan portfolio may
have consisted of up to $165.0 million of single-family residential loans. We
determined the bid prices on these loan pools on a pool-by-pool basis, through
an analysis of the pools return on equity and return on assets, desired yield
spreads, acceptable risk characteristics, market conditions and a thorough
analysis of the originator/seller. After our bid was accepted by the seller,
we conducted a due diligence review of the loans in the pool. Based on due
diligence results, individual loans were kept in the proposed pool, rejected
from the pool or put on hold pending additional information or a pricing
adjustment. The pool and pricing was then finalized, a purchase and sale
agreement signed, and the purchase completed. During 2001 and 2000, we bought
a total of 212 and 667 loans with a total outstanding principal balance of
$30.5 million and $79.0 million, paying a total premium of $823,000 and $1.7
million to acquire these loans, respectively. At December 31, 2001, 997 of
these loans remained, with an outstanding principal balance of $115.2 million
and related unamortized purchase premium of $1.7 million.

Franchise Loans. In 2000, we commenced purchasing franchise loans through
relationships with correspondent franchise loan originators. Franchise loans
are loans to owners of businesses, both franchisers and franchisees, such as
fast food restaurants or gasoline retailers, that are affiliated with
nationally or regionally recognized chains and brand names. Various
combinations of land, building, business equipment and fixtures may secure
these loans, or they may be a general obligation of the borrower based on a
valuation of the borrowers business and debt service ability. In each case,
the primary source of repayment is the cash flow of the business and not the
underlying value of the collateral. Our correspondent relationships, which may
change from time to time, allow us to purchase loans in our sole discretion
that meet our underwriting and yield criteria. During 2001 and 2000, we
purchased 17 loans and 4 loans, with a total commitment of $53.3 million and
$5.9 million, respectively. The outstanding balance of these loans as of
December 31, 2001 and 2000 was $57.6 million and $3.9 million, respectively.

Lending, Origination, Purchases and Underwriting.Many of the Banks
income producing property loans are made to lower credit grade borrowers that
have marginal credit histories or the property has other factors such as
debt-to-income ratios or property location that prevent the borrower from
obtaining a prime interest rate. Likewise, residential loans purchased
generally do not meet the Fannie Mae or Freddie Macs underwriting standards
with respect to credit, debt ratios and documentation, whether as a result of
marginal credit histories, the absence of credit history, high debt-to-income
ratios, reliance on the borrowers stated income, non-owner occupied property, rural property, balloon payment or a
variety of other exceptions from agency guidelines. We attempt to mitigate the
risk associated with these loans by charging higher interest rates and through
our loan approval and loan purchasing process. The Banks loan underwriters
are responsible for initial reviews of borrowers, properties, loan terms, and
submission of loans to the loan committee.



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All real estate loans over $1.0 million must be submitted to the loan
committee for approval. The Banks loan underwriters prepare a written
presentation on every loan application submitted to its loan committee, which
is comprised of the following Bank officers:



| |  | Chairman, Chief Executive Officer, President                           
|- |  | -----------------------------------------------------------------------
| 
| |  | Vice Chairman and Chief Credit Officer                                 
| 
| |  | Senior Managing Director/Chief Operating
Officer                       
| 
| |  | Managing Director/Chief
Lending Officer                                
| 
| |  | Managing Director/Director of Loan
Operations                          
| 
| |  | Deputy Managing Director/Retail Production
Manager                     
| 
| |  | First Vice President/Director of
Underwriting, Processing and Appraisal
| 
| |  | First Vice President of Credit Quality
Control                         
| 
| |  | First Vice President/Portfolio Administration                          

The underwriters presentation includes a description of the prospective
borrower and any guarantors, the collateral, and the proposed use(s) of loan
proceeds, as well as borrower and property financial statements and analysis.
Each application is evaluated from a number of underwriting perspectives,
including property appraised value, level of debt service coverage, remaining
economic life, use and condition, as well as borrower liquidity, net worth,
cash investment, income, credit history and operating experience. Our real
estate loans are originated on both a non-recourse and full recourse basis and
we generally seek to obtain personal guarantees from the principals of
borrowers which are single asset or limited liability entities (such as
partnerships, corporations or trusts) on properties that have not achieved
stabilization.

At least one loan committee member or designee must personally conduct
on-site inspections of any property involved in loan recommendations of $1.0
million or more. Loans up to $750,000 may be approved by any loan committee
member. Loans of $750,000 to $1.0 million require approval by any two members
of the Banks loan committee, while loans in excess of $1.0 million require
approval of three loan committee members. Additionally, loans over $2.0
million must be approved by the First Vice President of Credit Quality Control;
loans over $3.0 million require the additional signature of the Vice Chairman
and Chief Credit Officer; and individual loans over $5.0 million, loans
resulting in an aggregate borrowing relationship to one borrower in excess of
$7.5 million, and all purchased loan pools must be approved by the executive
committee of the Banks board of directors.

Variable rate loans over $500,000 must generally satisfy an interest rate
sensitivity test in order for the loan origination or purchase to be approved;
that is, the current stabilized income of real property security must be
adequate to achieve a minimum debt service coverage ratio of 80% if the
interest rate on the loan was at the maximum amount allowed under the terms of
the note, generally the fully indexed start rate plus 400 basis points.
Following loan approval and prior to funding, the Banks underwriting and
processing departments assure that all loan approval terms have been satisfied,
that they conform with lending policies (or are properly authorized
exceptions), and all required documentation is present and in proper form.

All reviews of residential loans being considered for purchase were
initially performed through our loan acquisition department. We placed bids on
pools of loans meeting our investment and credit risk objectives, subject to
due diligence and negotiation of an acceptable purchase agreement. The Banks
Vice Chairman and Chief Credit Officer and the Senior Managing
Director, Chief Financial Officer must
each approve the bid prior to submission. All purchases were made within the
parameters set by the Banks Board of Directors for loan purchases and
originations and required the approval of both the loan committee and the
asset/liability management committee.

If we were the successful bidder, a due diligence review of each loan in
the pool was completed to finalize the pool of loans to be acquired. This
review included an evaluation of the sellers representations and warranties
and of the adequacy of the applicable loan documentation (e.g., the existence
of a note, including confirmation of the interest rate and outstanding loan
balance, mortgage, title policy, borrower financial statements, tax returns,
environmental reports, etc.). An estimate of the current value of the real
estate collateral was determined by obtaining a brokers price opinion report
for every loan considered for purchase, which was then compared to and
reconciled with the original appraisal by staff appraisers from the Banks
appraisal department.



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The maximum size of a single real estate loan made by the Bank is limited
by California law to 25% of the Banks equity capital. At December 31, 2001,
that limit was approximately $31.1 million. The Banks largest combined credit
extension to related borrowers was $13.1 million at December 31, 2001. At
December 31, 2001, the Bank had a total of 149 extensions of credit, with a
combined outstanding principal balance of $540.8 million, that were over $2.0
million to a single borrower or related borrowers. All combined extensions of
credit over $2.0 million were performing in accordance with their repayment
terms. At December 31, 2001, the Bank had 2,123 secured real estate loans
outstanding, with an average balance per loan of approximately $539,000.

Servicing and Collections.Servicing of our purchased residential loans
is contracted to Fairbanks Capital Corporation, an organization specializing in
the collection and servicing of residential loans. Commercial real estate
loans held by the Bank are serviced by the Banks loan servicing department,
which is designed to provide prompt customer service, and accurate and timely
information for account follow-up, financial reporting and management review.
As discussed below, servicing of the loans held in the ICCMAC Trust is
performed by a third-party service. Following the funding or purchase of an
approved loan, all pertinent loan data is entered into the Banks data
processing system, which provides monthly billing statements, tracks payment
performance, and processes contractual interest rate adjustments on variable
rate loans. Regular loan service efforts include payment processing and
collection follow-up, as well as tracking the performance of additional
borrower obligations with respect to the maintenance of casualty insurance
coverage, payment of property taxes and senior liens, if any, and periodically
requesting required information, including current borrower and property
financial and operating statements. Additional services are performed by the
Bank in connection with the monitoring of loans to borrowers secured by
stabilizing projects. These projects involve lease-up or renovation
activities. The Bank monitors these loans to ensure that projects are
performing as underwritten. This monitoring allows the Bank to take a
proactive approach to addressing projects that do not perform as planned. When
payments are not received by their contractual due date, collection efforts
begin on the fifth day of delinquency with a telephone contact, and proceed to
written notices that progress from reminders of the borrowers payment
obligation to an advice that a notice of default may be forthcoming. Accounts
delinquent for more than 30 days are generally transferred to the Banks asset
management department which, following a review of the account and management
approval, implements a collection or restructure plan, or a disposition
strategy, and evaluates any potential loss exposure on the asset.

Competition.Our competition in originating real estate loans is
principally from community banks, savings and loan associations, other
industrial banks, real estate financing conduits, small insurance companies,
and occasionally larger banks. Many of these entities enjoy competitive
advantages over us relative to a potential borrower in terms of a prior
business relationship, wider geographic presence or more accessible branch
office locations, the ability to offer additional services or more favorable
pricing alternatives, or a lower cost of funds structure. We attempt to offset
the potential effect of these factors by providing borrowers with greater
individual attention and a more flexible and time-sensitive underwriting,
approval and funding process than they might obtain elsewhere.

Imperial Capital Real Estate Investment Trust

During 2000, we acquired all of the equity and certain CMOs of the ICCMAC
Trust through our real estate investment trust subsidiary, Imperial Capital
REIT. At December 31, 2001, the ICCMAC Trust held real estate loans of $162.2
million, comprised of approximately 65 percent and 35 percent of multifamily
and commercial loans, respectively, with over 50 percent of the loans secured
by property located in California. Over two-thirds of the loans are adjustable
rate mortgages. At December 31, 2001, the ICCMAC Trusts real estate loans
were held as collateral for $109.6 million of investment grade CMOs sold to
third party investors. The cash flow from the ICCMAC Trusts loan pool pays principal and
interest on the CMOs, and also provides cash flow on a monthly basis to ITLA
Capital. ITLA Capital had recorded $9.3 million of pre-tax income from its
investment in the ICCMAC Trust during the year ended December 31, 2001.

Servicing of the ICCMAC Trust loans is performed by Orix Capital Markets,
LLC (Orix), a Delaware limited liability company. Under the servicing
agreement, Orix is required to service and administer the commercial mortgage
loans held in trust solely on behalf of the best interests of and for the
benefit of the holders of the CMOs in accordance with the terms of the
servicing agreement and the commercial mortgage loans. Orix is required to



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perform other customary functions of a servicer of comparable loans, including
monitoring insurance coverage; maintaining escrow or impoundment accounts of
borrowers for payment of taxes, insurance and other items required to be paid
pursuant to the loan agreement; processing assumptions or substitutions in
those cases where the loan servicer has determined not to enforce any
applicable due-on-sale clause; demanding that the borrower cure delinquencies;
inspecting and managing commercial mortgaged properties under certain
circumstances; and maintaining records relating to the commercial mortgage
loans.

Nonperforming Assets and Other Loans of Concern

At December 31, 2001, nonperforming assets totaled $29.0 million or 1.92%
of total assets. Nonperforming assets consisted of $2.5 million of nonaccrual
commercial real estate loans, $12.8 million of nonaccrual residential real
estate loans which were sold on March 28, 2002 and $13.7 million of other real
estate owned. One of our nonperforming real estate loans had an outstanding
balance greater than $1.0 million. For additional information regarding
nonperforming assets see Item 7: Managements Discussion and Analysis of
Financial Condition and Results of Operations-Credit Risk Elements.

The following is a brief discussion of the non-accrual loan where the
remaining principal balance of the loan at December 31, 2001, exceeded $1.0
million.

Loan Secured by a Senior Apartment Complex  California.This loan was
originated by the Bank in December 1997 with an original balance of $1.6
million, which included funds to convert the property into senior apartments.
No payments have been received since August 2000. The loan balance as of
December 31, 2001 was $1.6 million. The property was 92% occupied as of
December 2001. The loan matured in 2000, a notice of default has been filed
and the loan is currently in foreclosure.

As of December 31, 2001, we had outstanding loans with an aggregate
outstanding balance of $21.5 million with respect to which known information
concerning possible credit problems with the borrowers or the cash flows of the
properties securing the respective loans has caused management to be concerned
about the ability of the borrowers to comply with present loan repayment terms,
which may result in the future inclusion of such loans in the nonaccrual loan
category. All of these loans are classified as substandard pursuant
to the regulatory guidelines discussed below. The following is a brief discussion of our other loans of concern
where the remaining principal balance of the loan at December 31, 2001 exceeded
$2.0 million.

| |                                                                                                                                                                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Loan Secured by Hotel  Utah.This loan was originated by the Bank
in September 1998 with an original commitment of $3.8 million to
construct a 104-unit hotel. The outstanding principal balance at
December 31, 2001 was $3.8 million. The property has yet to stabilize
and the cash flow from the operations of the collateral has been less
than the debt service on our loan.

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Loan Secured by Hotel  Arizona. This loan was originated by the
Bank in July 1998 with an original commitment of $4.0 million secured by
a 99-unit hotel. The outstanding principal balance at December 31, 2001
was $3.7 million. The loan has paid as agreed since inception, however,
the cash flow from the operations of the collateral has been less than
the debt service on our loan for the last three years. We continue to
monitor the borrowers efforts to improve the cash flow of the hotel.

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Loan Secured by a Hotel  Washington. This loan was originated by
the Bank in February 1998 with an original commitment of $3.7 million
secured by 123-unit hotel. The outstanding principal balance at December
31, 2001 was $3.0 million. The loan has paid as agreed since inception,
however, the cash flow from the operations of the collateral has been
less than the debt service on our loan. We continue to monitor the
borrowers efforts to improve the cash flow of the hotel.

Classified Assets

Management uses a loan classification system consistent with the
classification system used by bank regulatory agencies to help it evaluate the
risks inherent in its real estate loan portfolio. Loans are identified as



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pass, substandard, doubtful or loss based upon consideration of all
sources of repayment, underlying collateral values, current and anticipated
economic conditions, trends and uncertainties, and historical experience. Pass
loans are further divided into four additional sub-categories, based on the
borrowers financial strength and ability to service the debt and/or the value
and debt service capacity of the underlying collateral. Underlying collateral
values for real estate dependent loans are supported by property appraisals or
evaluations. We review our loan classifications on at least a quarterly basis.
At December 31, 2001, we classified $36.2 million of loans
as substandard,
$620,000 as doubtful and none as loss. $15.3 million of
these classified loans were included in the nonperforming assets table in Item 7.
Managements Discussion and Analysis of Results of Financial Condition and
Operations  Credit Risk Elements, and the balance was included in the $21.5
million of other loans of concern, discussed above.

Funding Sources

The primary source of funding for the Banks lending operations and
investments are investment certificates, which are functionally equivalent to
certificates of deposit at banks and savings and loan associations and are
hereinafter referred to as deposits. The Banks deposits are federally
insured by the FDIC to the extent permitted by law. Approximately 83% of the
Banks deposits are term deposits that pay fixed rates of interest for periods
ranging from 90 days to five years. The remaining 17% of the Banks deposits
are variable rate passbook accounts and variable rate money market accounts
with limited checking features.

As with many other industrial banks in California, the Banks strategy
with all deposit accounts is to offer rates significantly above those
customarily offered by other financial institutions in its market. The Bank has
generally accumulated deposits by relying on renewals of term accounts by
existing depositors, participating in deposit rate surveys which promote the
rate offered by the Bank on its deposit products, and periodically advertising
in various local market newspapers and other media. The Bank is able to pursue
this strategy by operating a savings branch system offering fewer products and
services than many institutions. Because the Bank does not provide demand
checking accounts, safe deposit boxes, money orders, trust services, and
various other retail banking services, management believes its staffing and
overhead costs are significantly lower than banks and savings institutions.
Management further believes that its deposits are a reliable funding source and
that the cost of funds resulting from the Banks deposit gathering strategy is
comparable to those of other industrial banks pursuing a similar strategy.
However, because the Bank competes for deposits primarily on the basis of
rates, the Bank could experience difficulties in attracting deposits if it
could not continue to offer deposit rates at levels above those of the banks
and savings institutions. Management also believes that any efforts to
significantly increase the size of its deposit base may require greater
marketing efforts and/or increases in deposit rates. Although there were no
brokered deposits outstanding at December 31, 2001, the Bank may seek such
deposits in the future. For information concerning overall deposits
outstanding during the periods indicated and the rates paid thereon, see Item
7. Managements Discussion and Analysis of Financial Condition and Results of
Operations  Net Interest Income.

The Bank has also
used advances from the FHLB of San
Francisco as a funding source. The Bank became a member of the FHLB of San Francisco in 1994 and was subsequently approved for a credit
line up to 30% of its total assets. FHLB advances are
collateralized by pledges of qualifying cash equivalents, investment
securities, mortgage-backed securities and whole loan collateral. At December
31, 2001, FHLB advances outstanding totaled $269.3 million,
and the remaining available borrowing capacity, based on the loans and
securities pledged as collateral, totaled $87.5 million, net of the $4.6
million of additional FHLB Stock that we would be required to purchase to
support the additional borrowings. Additionally, the Bank also has uncommitted,
unsecured lines of credit with other banks renewable daily in the amount of
$30.0 million. See Item 8. Financial Statements and Supplementary Data -
Notes to Consolidated Financial Statements  Notes 2, 3, 7 and 8.

Regulation

The Bank is an industrial bank that is subject to examination, supervision
and regulation by the Department of Financial Institutions of the State of
California (the DFI) and, as an insured institution, by the FDIC. As
a result of legislation which became effective on October 1, 2000, industrial
banks, formerly known as industrial



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loan companies, are now generally subject to the same California banking
law as commercial banks. Industrial banks are now generally able to engage in
all the activities of a California commercial bank, including, subject to
approval, the trust business. However, industrial banks such as Imperial
Capital Bank still may not accept demand deposits. The Banks holding company,
ITLA Capital, is not a bank holding company for federal Bank Holding Company
Act purposes and is not directly regulated or supervised by the DFI, the
FDIC, the Federal Reserve Bank or any other bank regulatory authority, except
with respect to the general regulatory and enforcement authority of the
DFI and the FDIC over transactions and dealings between us and the Bank,
and except with respect to both the specific limitations regarding ownership of
the capital stock of the parent corporation of any industrial bank.

California Law

The industrial banking business conducted by the Bank, formerly governed
by the California Industrial Loan Law, is now subject to the California Banking
Laws and the rules and regulations of the DFI. The regulations of the
DFI govern most aspects of the Banks businesses and operations,
including, but not limited to, the scope of its business, investments, the
nature and amount of any collateral for loans, the issuance of securities, the
payment of dividends, bank expansion and bank activities. The DFIs
supervision of the Bank includes comprehensive reviews of all aspects of the
Banks business and condition, and the DFI possesses broad remedial
enforcement authority to influence the Banks operations, both formally and
informally.

Federal Law

Because our deposits are insured by the Bank Insurance Fund of the FDIC,
the FDIC, in addition to the DFI, also broadly regulates the Bank. As
an insurer of deposits, the FDIC issues regulations, conducts examinations,
requires the filing of reports, and generally supervises the operations of
institutions to which it provides deposit insurance. The FDIC is also the
federal agency charged with regulating state-chartered banks that are not
members of the Federal Reserve System, such as the Bank. Therefore any person
who wishes to acquire control of the Bank must obtain the consent of both the
FDIC and the DFI. Insured depository institutions, and their
institution-affiliated parties, may be subject to potential enforcement actions
by the FDIC and the DFI for unsafe or unsound practices in conducting
their businesses or for violations of any law, rule, regulation or any
condition imposed in writing by the agency or any written agreement with the
agency. Management is not aware of any pending or threatened enforcement
actions against the Bank.

Regulatory Capital Requirements.Federally-insured, state-chartered
banks, including industrial banks such as the Bank, are required to maintain
minimum levels of regulatory capital as specified in the FDICs capital
maintenance regulations. The FDIC also is authorized to impose capital
requirements in excess of these standards on individual banks on a case-by-case
basis.

The Bank is required to comply with three separate minimum capital
requirements: a tier 1 capital ratio and two risk-based capital
requirements. Tier 1 capital generally includes common shareholders equity,
including retained earnings, qualifying noncumulative perpetual preferred stock
and any related surplus, and minority interests in the equity accounts of fully
consolidated subsidiaries, less intangible assets, other than properly valued
purchased mortgage servicing rights up to certain specified limits and less net
deferred tax assets in excess of certain specified limits.

Tier 1 Capital Ratio.FDIC regulations establish a minimum 3.0% ratio of
Tier 1 capital to total average assets for the most highly-rated
state-chartered, FDIC-supervised banks. All other FDIC supervised banks must
maintain at least a 4.0% tier 1 capital ratio. Under FDIC regulations,
highly-rated banks are those that the FDIC determines are not anticipating or
experiencing significant growth and have well diversified risk, including no
undue interest rate risk exposure, excellent asset quality, high liquidity and
good earnings. At December 31, 2001, the Banks required tier 1 capital ratio
was 4.0% and its actual tier 1 capital ratio was 10.1%.

Risk-Based Capital Requirements.The risk-based capital requirements
generally require the Bank to maintain a ratio of tier 1 capital to
risk-weighted assets of at least 4.0% and a ratio of total risk-based capital
to risk-weighted assets of at least 8.0%. To calculate the amount of capital
required, assets are placed in one of four categories and given a percentage
weight (0%, 20%, 50% or 100%) based on the relative risk of the category. For



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example, United States Treasury Bills and Ginnie Mae securities are placed in
the 0% risk category. Fannie Mae and Freddie Mac securities are placed in the
20% risk category, loans secured by one-to four family residential properties
and certain privately-issued mortgage-backed securities are generally placed in
the 50% risk category, and commercial and consumer loans and other assets are
generally placed in the 100% risk category. In addition, certain
off-balance-sheet items are converted to balance sheet credit equivalent
amounts and each amount is then assigned to one of the four categories.

For purposes of the risk-based capital requirements, total capital means
tier 1 capital plus supplementary or tier 2 capital, so long as the amount of
supplementary or tier 2 capital that is used to satisfy the requirement does
not exceed the amount of tier 1 capital. Tier 2 capital includes cumulative or
other perpetual preferred stock, mandatory convertible subordinated debt and
perpetual subordinated debt, mandatory redeemable preferred stock,
intermediate-term preferred stock, mandatory convertible subordinated debt and
subordinated debt, and the allowance for loan losses up to a maximum of 1.25%
of risk-weighted assets. At December 31, 2001 the Banks tier 1 risk-based and
total capital ratios were 10.7% and 12.0%, respectively.

The federal banking agencies have adopted regulations specifying that the
agencies will include, in their evaluations of a banks capital adequacy, an
assessment of the exposure to declines in the economic value of the banks
capital due to changes in interest rates. The FDIC and the other federal
banking agencies have also promulgated final amendments to their respective
risk-based capital requirements which identify concentration of credit risk and
certain risks arising from nontraditional activities, and the management of
such risk, as important factors to consider in assessing an institutions
overall capital adequacy. The FDIC may now require higher minimum capital
ratios based on certain circumstances, including where the institution has
significant risks from concentration of credit or certain risks arising from
nontraditional activities.

Prompt Corrective Action Requirements.The FDIC has implemented a system
requiring regulatory sanctions against state-chartered banks (which, for this
purpose, includes the Bank) that are not adequately capitalized, with the
sanctions growing more severe the lower the institutions capital. The FDIC
has established specific capital ratios for five separate capital categories:
well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized.

An institution is treated as well capitalized if its total risk based
capital ratio is 10.0% or more, its tier 1 risk-based ratio is 6.0% or more,
its tier 1 capital ratio is 5.0% or greater, and it is not subject to any order
or directive by the FDIC to meet a specific capital level. The Bank exceeded
these requirements at December 31, 2001.

The FDIC is authorized and, under certain circumstances, required to take
certain actions against institutions that fail to meet their capital
requirements. The FDIC is generally required to take action to restrict the
activities of an undercapitalized institution. Any such institution must
submit a capital restoration plan and, until such plan is approved by the FDIC,
may not increase its assets, acquire another institution, establish a branch or
engage in any new activities, and generally may not make capital distributions.

In addition, the FDIC must appoint a receiver or conservator for an
institution, with certain limited exceptions, within 90 days after it becomes
critically undercapitalized. Any undercapitalized institution is also
subject to the general enforcement authority of the FDIC, including the
appointment of a conservator or a receiver.

The FDIC is also generally authorized to reclassify an institution into a
lower capital category and impose the restrictions applicable to such category
if the institution is engaged in unsafe or unsound practices or is in an unsafe
or unsound condition.

Community Reinvestment Act and Fair Lending Developments.The Bank is
subject to certain fair lending requirements and reporting obligations
involving lending operations and Community Reinvestment Act activities.
Federal banking agencies are required to evaluate the record of financial
institutions in meeting the credit needs of their local communities, including
low and moderate income neighborhoods. In addition to substantial penalties
and corrective measures that may be required for a violation of certain fair
lending laws, the federal banking agencies may take compliance with such laws
into account when regulating and supervising other activities. In its most
recent examination, the FDIC rated the Bank satisfactory in complying with
its Community Reinvestment Act obligations.



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Fiscal and Monetary Policies.Our business and earnings are affected
significantly by the fiscal and monetary policies of the federal government and
its agencies. We are particularly affected by the policies of the Federal
Reserve Board, which regulates the supply of money and credit in the United
States. Among the instruments of monetary policy available to the Federal
Reserve Board are (a) conducting open market operations in United States
government securities; (b) changing the discount rates of borrowings of
depository institutions, (c) imposing or changing reserve requirements against
depository institutions deposits, and (d) imposing or changing reserve
requirements against certain borrowings by banks and their affiliates. These
methods are used in varying degrees and combinations to directly affect the
availability of bank loans and deposits, as well as the interest rates charged
on loans and paid on deposits. The policies of the Federal Reserve Board may
have a material effect on the Companys business, results of operations and
financial condition.

Privacy Provisions of the Gramm-Leach-Bliley Act. Federal banking
regulators, as required under the Gramm-Leach-Bliley Act (the GLB Act), have
adopted rules limiting the ability of banks and other financial institutions to
disclose nonpublic information about consumers to nonaffiliated third parties.
The rules require disclosure of privacy policies to consumers and, in some
circumstances, allow consumers to prevent disclosure of certain personal
information to nonaffiliated third parties. The privacy provisions of the GLB
Act will affect how consumer information is transmitted through diversified
financial service companies and conveyed to outside vendors. In California,
the attempt in the state legislature to pass a California version of a privacy
bill failed in 2001, but it is expected that the proponents of such privacy
proposals will re-introduce financial privacy bills in the next session. The
GLB Act permits states to enact their own privacy rules which may be stricter
than those under the GLB Act. We cannot predict at this time what terms will
be considered in any proposed California privacy legislation, whether any such
proposed legislation will be enacted and if so, when such legislation may
become effective. Therefore, it is not possible at this time to assess fully
the impact of the privacy provisions on our business, results of operations or
financial condition.

Future Legislation.Various legislation, including proposals to change
substantially the financial institution regulatory system, is from time to time
introduced in Congress. This legislation may change banking statutes and the
operating environment of the Company in substantial and unpredictable ways. If
enacted, this legislation could increase or decrease the cost of doing
business, limit or expand permissible activities or affect the competitive
balance among banks, savings associations, credit unions, and other financial
institutions. We cannot predict whether any of this potential legislation will
be enacted and, if enacted, the effect that it, or any implementing
regulations, would have on our business, results of operations or financial
condition.



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Item 2. Properties

ITLA Capital leases
approximately 55,000 square feet of office space for
its operations as shown below.

|                  |  |                                                                       |  |         |        |            |  |              |      | 
|----------------- |  | --------------------------------------------------------------------- |  | ------- | ------ | ---------- |  | ------------ | ---- | 
|                  |  |                                                                       |  |         |        |            |  | Year Current
|                  |  |                                                                       |  | Square  |        | Lease Term
|Locations         |  | Office Uses                                                           |  | Footage |        | Expires   
|                  |  |                                                                       |  |         |        |           
|La Jolla, CA      |  | Corporate Headquarters                                                |  |         | 10,582 |            |  |              | 2003 | 
|La Jolla, CA      |  | Audit and Marketing                                                   |  |         | 2,325  |            |  |              | 2006 | 
|Glendale, CA      |  | Loan Operations Division/Real Estate Lending                          |  |         | 8,932  |            |  |              | 2005 | 
|San Francisco, CA |  | Retail Deposit Branch/Real Estate Lending                             |  |         | 5,005  |            |  |              | 2002 | 
|Beverly Hills, CA |  | Retail Deposit Branch                                                 |  |         | 2,218  |            |  |              | 2005 | 
|Costa Mesa, CA    |  | Retail Deposit Branch/Money Desk
Operations/Real Estate Lending       |  |         | 3,609  |            |  |              | 2006 | 
|Del Mar, CA       |  | Retail Deposit Branch/Savings Operations
Division/Real Estate Lending |  |         | 2,847  |            |  |              | 2004 | 
|Encino, CA        |  | Retail Deposit Branch                                                 |  |         | 5,298  |            |  |              | 2004 | 
|Santa Monica, CA  |  | Loan Operations/Imperial Capital Express                              |  |         | 4,991  |            |  |              | 2004 | 
|Encino, CA        |  | Operations Support                                                    |  |         | 3,163  |            |  |              | 2004 | 
|Glendale, CA      |  | Retail Deposit Branch/Loan Administration Division                    |  |         | 6,257  |            |  |              | 2006 | 

For additional information regarding our premises, see Item 8. Financial
Statements and Supplementary Data  Notes to Consolidated Financial Statements
- Note 15.

Management believes that ITLA Capitals present facilities are adequate
for its current needs, and that alternative or additional space, if necessary,
will be available on reasonable terms.




Item 3. Legal Proceedings

We are party to certain legal proceedings incidental to our business.
Management believes that the outcome of such proceedings, in the aggregate,
will not have a material effect on our business, financial condition or results
of operations.






|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended December 31,
2001.



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PART II






|Item 5. | Market for Registrants Common Equity and Related Stockholder Matters
|------- | ---------------------------------------------------------------------

Our common stock is traded on the NASDAQ national market system under the
symbol ITLA. As of December 31, 2001, there were 8 holders of record of our
common stock representing an estimated 1,000 beneficial shareholders with a
total of 5,858,693 shares outstanding.

The following table sets forth, for the periods indicated, the range of
high and low trade prices for our common stock. Stock price data on NASDAQ
reflects inter-dealer prices, without retail mark-up, mark-down or commission.

|     |             |  |              |       |               |  |       |       |               |  |   |       |  |  |   |       | 
|---- | ----------- |  | ------------ | ----- | ------------- |  | ----- | ----- | ------------- |  | - | ----- |  |  | - | ----- | 
|     |             |  | Market Price |       |               |  |      
|     |             |  |              |       | Average Daily
|     |             |  | High         |       | Low           |  | Close |       | Closing Price
|     |             |  |              |       |               |  |       |       |              
|2001 |             |  |              |       |               |  |       |       |               |  |   |       |  |  |   |      
|     | 4th Quarter |  | $            | 21.05 |               |  | $     | 17.86 |               |  | $ | 20.96 |  |  | $ | 19.20 | 
|     | 3rd Quarter |  |              | 20.25 |               |  |       | 17.57 |               |  |   | 20.25 |  |  |   | 18.22 | 
|     | 2nd Quarter |  |              | 19.75 |               |  |       | 15.90 |               |  |   | 18.00 |  |  |   | 17.55 | 
|     | 1st Quarter |  |              | 20.00 |               |  |       | 18.75 |               |  |   | 20.00 |  |  |   | 19.56 | 
|2000 |             |  |              |       |               |  |       |       |               |  |   |       |  |  |   |      
|     | 4th Quarter |  | $            | 19.13 |               |  | $     | 14.25 |               |  | $ | 19.13 |  |  | $ | 15.09 | 
|     | 3rd Quarter |  |              | 15.31 |               |  |       | 13.88 |               |  |   | 14.81 |  |  |   | 14.45 | 
|     | 2nd Quarter |  |              | 15.00 |               |  |       | 12.75 |               |  |   | 14.50 |  |  |   | 13.51 | 
|     | 1st Quarter |  |              | 13.00 |               |  |       | 10.75 |               |  |   | 12.75 |  |  |   | 11.71 | 

The following table includes supplementary quarterly operating results and
per share information for the past two years. The data presented should be
read along with Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operations and with Item 8. Financial Statements
and Supplementary Data included elsewhere in this report.



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Quarterly Operations (Unaudited)

|     |                                                      |  |                                         |        |         |  |              |        |             |  |   |        |  |  |   |        |  
|---- | ---------------------------------------------------- |  | --------------------------------------- | ------ | ------- |  | ------------ | ------ | ----------- |  | - | ------ |  |  | - | ------ | -
|     |                                                      |  | For the Quarter Ended                  
|     |                                                      |  |                                        
|     |                                                      |  | March 31                                |        | June 30 |  | September 30 |        | December 31
|     |                                                      |  |                                         |        |         |  |              |        |            
|     |                                                      |  | (in thousands except per share amounts)
|2001 |                                                      |  |                                         |        |         |  |              |        |             |  |   |        |  |  |   |       
|     | Net interest income before
provision for loan losses |  | $                                       | 13,628 |         |  | $            | 14,515 |             |  | $ | 14,410 |  |  | $ | 16,679 |  
|     | Provision for loan losses                            |  |                                         | 450    |         |  |              | 500    |             |  |   | 1,500  |  |  |   | 2,125  |  
|     | Non-interest income                                  |  |                                         | 314    |         |  |              | 239    |             |  |   | 251    |  |  |   | 255    |  
|     | General and administrative expense                   |  |                                         | 5,131  |         |  |              | 5,781  |             |  |   | 5,672  |  |  |   | 6,234  |  
|     | Total real estate owned expense, net                 |  |                                         | 169    |         |  |              | 47     |             |  |   | 68     |  |  |   | 103    |  
|     | Provision for income taxes                           |  |                                         | 2,905  |         |  |              | 2,911  |             |  |   | 2,583  |  |  |   | 2,994  |  
|     | Net income                                           |  |                                         | 4,713  |         |  |              | 4,719  |             |  |   | 4,039  |  |  |   | 4,680  |  
|     | Basic earnings per share                             |  | $                                       | 0.70   |         |  | $            | 0.71   |             |  | $ | 0.64   |  |  | $ | 0.77   |  
|     | Diluted earnings per share                           |  | $                                       | 0.67   |         |  | $            | 0.69   |             |  | $ | 0.62   |  |  | $ | 0.74   |  
|2000 |                                                      |  |                                         |        |         |  |              |        |             |  |   |        |  |  |   |       
|     | Net interest income before
provision for loan losses |  | $                                       | 12,917 |         |  | $            | 13,880 |             |  | $ | 14,080 |  |  | $ | 14,256 |  
|     | Provision for loan losses                            |  |                                         | 600    |         |  |              | 1,200  |             |  |   | 1,525  |  |  |   | 1,450  |  
|     | Non-interest income                                  |  |                                         | 1,574  |         |  |              | 144    |             |  |   | 208    |  |  |   | 405    |  
|     | General and administrative expense                   |  |                                         | 6,665  |         |  |              | 5,101  |             |  |   | 5,006  |  |  |   | 5,282  |  
|     | Total real estate owned expense, net                 |  |                                         | 159    |         |  |              | (54    | )           |  |   | 36     |  |  |   | (3     | )
|     | Provision for income taxes                           |  |                                         | 2,823  |         |  |              | 3,184  |             |  |   | 2,999  |  |  |   | 2,874  |  
|     | Net income                                           |  |                                         | 4,244  |         |  |              | 4,593  |             |  |   | 4,623  |  |  |   | 4,679  |  
|     | Basic earnings per share                             |  | $                                       | 0.59   |         |  | $            | 0.64   |             |  | $ | 0.66   |  |  | $ | 0.69   |  
|     | Diluted earnings per share                           |  | $                                       | 0.58   |         |  | $            | 0.63   |             |  | $ | 0.65   |  |  | $ | 0.66   |  




Item 6. Selected Financial Data

The following condensed statements of operations and financial condition
and selected performance ratios as of December 31, 2001, 2000, 1999, 1998, and
1997 and for the years then ended have been derived from our audited
consolidated financial statements. The information below is qualified in its
entirety by the detailed information included elsewhere herein and should be
read along with Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operations.



16



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##### Table of Contents



|                                                                                                              |                                                                                                      |                                            |           |                                           |           |      |           |        |           |      |         |        |           |   |         |        |           |   |         |        |           | 
|------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | ------------------------------------------ | --------- | ----------------------------------------- | --------- | ---- | --------- | ------ | --------- | ---- | ------- | ------ | --------- | - | ------- | ------ | --------- | - | ------- | ------ | --------- | 
|                                                                                                              |                                                                                                      |                                            |           | As of and for the Years Ended December 31
|                                                                                                              |                                                                                                      |                                            |           |                                          
|                                                                                                              |                                                                                                      |                                            |           | 2001                                      |           | 2000 |           | 1999   |           | 1998 |         | 1997  
|                                                                                                              |                                                                                                      |                                            |           |                                           |           |      |           |        |           |      |         |       
|                                                                                                              |                                                                                                      |                                            |           | (in thousands except per share amount)   
|Condensed Statements of Operations                                                                            |                                                                                                      |                                            |           |                                           |           |      |           |        |           |      |         |        |           |   |         |        |           |   |         |       
|Total interest income                                                                                         |                                                                                                      | $                                          | 123,095   |                                           |           | $    | 123,775   |        |           | $    | 101,213 |        |           | $ | 101,665 |        |           | $ | 85,117  |       
|Total interest expense                                                                                        |                                                                                                      |                                            | 63,863    |                                           |           |      | 68,642    |        |           |      | 48,460  |        |           |   | 51,387  |        |           |   | 43,310  |       
|                                                                                                              | Net interest income before provisions for loan losses
and valuation allowance on loans held for sale |                                            |           | 59,232                                    |           |      |           | 55,133 |           |      |         | 52,753 |           |   |         | 50,278 |           |   |         | 41,807 |          
|Provision for loan losses                                                                                     |                                                                                                      |                                            | 4,575     |                                           |           |      | 4,775     |        |           |      | 4,950   |        |           |   | 4,550   |        |           |   | 3,300   |       
|Provision for valuation allowance on loans held for sale                                                      |                                                                                                      |                                            |          |                                           |           |      |          |        |           |      |        |        |           |   | 1,400   |        |           |   | 350     |       
|                                                                                                              |                                                                                                      |                                            |           |                                           |           |      |           |        |           |      |         |        |           |   |         |        |           |   |         |       
|                                                                                                              | Net interest income after provisions for losses and
valuation allowance on loans held for sale       |                                            |           | 54,657                                    |           |      |           | 50,358 |           |      |         | 47,803 |           |   |         | 44,328 |           |   |         | 38,157 |          
|                                                                                                              |                                                                                                      |                                            |           |                                           |           |      |           |        |           |      |         |        |           |   |         |        |           |   |         |       
|Non-interest income                                                                                           |                                                                                                      |                                            | 1,059     |                                           |           |      | 2,331     |        |           |      | 901     |        |           |   | 2,447   |        |           |   | 1,640   |       
|                                                                                                              |                                                                                                      |                                            |           |                                           |           |      |           |        |           |      |         |        |           |   |         |        |           |   |         |       
|Non-interest expense:                                                                                         |                                                                                                      |                                            |           |                                           |           |      |           |        |           |      |         |        |           |   |         |        |           |   |         |       
|                                                                                                              | Compensation and benefits                                                                            |                                            |           | 11,778                                    |           |      |           | 9,958  |           |      |         | 9,739  |           |   |         | 10,564 |           |   |         | 8,511  |          
|                                                                                                              | Occupancy and equipment                                                                              |                                            |           | 2,968                                     |           |      |           | 2,567  |           |      |         | 2,788  |           |   |         | 2,783  |           |   |         | 2,444  |          
|                                                                                                              | Other general and administrative expenses                                                            |                                            |           | 8,072                                     |           |      |           | 8,129  |           |      |         | 8,230  |           |   |         | 7,317  |           |   |         | 7,277  |          
|                                                                                                              | Real estate owned expense, net                                                                       |                                            |           | 387                                       |           |      |           | 138    |           |      |         | 472    |           |   |         | 984    |           |   |         | 433    |          
|                                                                                                              |                                                                                                      |                                            |           |                                           |           |      |           |        |           |      |         |        |           |   |         |        |           |   |         |       
|                                                                                                              |                                                                                                      | Total recurring non-interest expense       |           |                                           | 23,205    |      |           |        | 20,792    |      |         |        | 21,229    |   |         |        | 21,648    |   |         |        | 18,665    | 
|                                                                                                              | Nonrecurring expense                                                                                 |                                            |           |                                          |           |      |           | 1,400  | (1)       |      |         |       |           |   |         |       |           |   |         |       |          
|                                                                                                              |                                                                                                      |                                            |           |                                           |           |      |           |        |           |      |         |        |           |   |         |        |           |   |         |       
|                                                                                                              |                                                                                                      | Total non-interest expense                 |           |                                           | 23,205    |      |           |        | 22,192    |      |         |        | 21,229    |   |         |        | 21,648    |   |         |        | 18,665    | 
|                                                                                                              |                                                                                                      |                                            |           |                                           |           |      |           |        |           |      |         |        |           |   |         |        |           |   |         |       
|                                                                                                              | Income before provision for income taxes and minority
interest in income of subsidiary               |                                            |           | 32,511                                    |           |      |           | 30,497 |           |      |         | 27,475 |           |   |         | 25,127 |           |   |         | 21,132 |          
|                                                                                                              | Minority interest in income of subsidiary                                                            |                                            |           | 2,967                                     |           |      |           | 478    |           |      |         |       |           |   |         |       |           |   |         |       |          
|                                                                                                              |                                                                                                      |                                            |           |                                           |           |      |           |        |           |      |         |        |           |   |         |        |           |   |         |       
|                                                                                                              | Income before provision for income taxes                                                             |                                            |           | 29,544                                    |           |      |           | 30,019 |           |      |         | 27,475 |           |   |         | 25,127 |           |   |         | 21,132 |          
|Provision for income taxes                                                                                    |                                                                                                      |                                            | 11,393    |                                           |           |      | 11,880    |        |           |      | 11,270  |        |           |   | 10,304  |        |           |   | 8,655   |       
|                                                                                                              |                                                                                                      |                                            |           |                                           |           |      |           |        |           |      |         |        |           |   |         |        |           |   |         |       
|NET INCOME                                                                                                    |                                                                                                      | $                                          | 18,151    |                                           |           | $    | 18,139    |        |           | $    | 16,205  |        |           | $ | 14,823  |        |           | $ | 12,477  |       
|                                                                                                              |                                                                                                      |                                            |           |                                           |           |      |           |        |           |      |         |        |           |   |         |        |           |   |         |       
|BASIC EARNINGS PER SHARE                                                                                      |                                                                                                      | $                                          | 2.82      |                                           |           | $    | 2.57      |        |           | $    | 2.26    |        |           | $ | 1.95    |        |           | $ | 1.61    |       
|DILUTED EARNINGS PER SHARE                                                                                    |                                                                                                      | $                                          | 2.72      |                                           |           | $    | 2.51      |        |           | $    | 2.21    |        |           | $ | 1.89    |        |           | $ | 1.57    |       
|Dividends paid                                                                                                |                                                                                                      | $                                          |          |                                           |           | $    |          |        |           | $    |        |        |           | $ |        |        |           | $ |        |       
|Condensed Statements of Financial Condition                                                                   |                                                                                                      |                                            |           |                                           |           |      |           |        |           |      |         |        |           |   |         |        |           |   |         |       
|Cash and cash equivalents                                                                                     |                                                                                                      | $                                          | 134,241   |                                           |           | $    | 70,950    |        |           | $    | 72,242  |        |           | $ | 125,602 |        |           | $ | 123,885 |       
|Investment securities available for sale, at fair value                                                       |                                                                                                      |                                            | 29,411    |                                           |           |      | 46,325    |        |           |      | 59,247  |        |           |   | 329     |        |           |   | 35,281  |       
|Stock in Federal Home Loan Bank                                                                               |                                                                                                      |                                            | 13,464    |                                           |           |      | 3,963     |        |           |      | 8,894   |        |           |   | 12,633  |        |           |   | 11,919  |       
|Investment and mortgage-backed securities held to maturity                                                    |                                                                                                      |                                            |          |                                           |           |      |          |        |           |      |        |        |           |   |        |        |           |   | 25,132  |       
|Real estate loans, net                                                                                        |                                                                                                      |                                            | 1,122,370 |                                           |           |      | 1,045,927 |        |           |      | 951,480 |        |           |   | 862,089 |        |           |   | 750,853 |       
|Real estate loans held in trust, net                                                                          |                                                                                                      |                                            | 162,158   |                                           |           |      | 211,722   |        |           |      |        |        |           |   |        |        |           |   |        |       
|Loans held for sale, at lower of cost or fair market value                                                    |                                                                                                      |                                            |          |                                           |           |      |          |        |           |      |        |        |           |   | 12,188  |        |           |   | 50,544  |       
|Interest receivable                                                                                           |                                                                                                      |                                            | 11,144    |                                           |           |      | 11,821    |        |           |      | 7,383   |        |           |   | 6,321   |        |           |   | 4,916   |       
|Other real estate owned, net                                                                                  |                                                                                                      |                                            | 13,741    |                                           |           |      | 2,250     |        |           |      | 1,041   |        |           |   | 1,201   |        |           |   | 3,946   |       
|Premises and equipment, net                                                                                   |                                                                                                      |                                            | 2,177     |                                           |           |      | 2,690     |        |           |      | 3,253   |        |           |   | 3,493   |        |           |   | 3,169   |       
|Deferred income taxes                                                                                         |                                                                                                      |                                            | 11,869    |                                           |           |      | 11,302    |        |           |      | 9,401   |        |           |   | 6,270   |        |           |   | 4,190   |       
|Other assets                                                                                                  |                                                                                                      |                                            | 7,733     |                                           |           |      | 8,193     |        |           |      | 2,882   |        |           |   | 2,521   |        |           |   | 2,074   |       
|                                                                                                              |                                                                                                      |                                            |           |                                           |           |      |           |        |           |      |         |        |           |   |         |        |           |   |         |       
|                                                                                                              |                                                                                                      | Total Assets                               |           | $                                         | 1,508,308 |      |           | $      | 1,415,143 |      |         | $      | 1,115,823 |   |         | $      | 1,032,647 |   |         | $      | 1,015,909 | 
|                                                                                                              |                                                                                                      |                                            |           |                                           |           |      |           |        |           |      |         |        |           |   |         |        |           |   |         |       
|Deposit accounts                                                                                              |                                                                                                      | $                                          | 953,654   |                                           |           | $    | 1,015,699 |        |           | $    | 913,613 |        |           | $ | 866,798 |        |           | $ | 843,813 |       
|Collateralized mortgage obligations                                                                           |                                                                                                      |                                            | 109,648   |                                           |           |      | 161,852   |        |           |      |        |        |           |   |        |        |           |   |        |       
|Federal Home Loan Bank advances                                                                               |                                                                                                      |                                            | 269,285   |                                           |           |      | 79,250    |        |           |      | 67,250  |        |           |   | 48,500  |        |           |   | 61,500  |       
|Account payable and other liabilities                                                                         |                                                                                                      |                                            | 9,674     |                                           |           |      | 11,269    |        |           |      | 11,265  |        |           |   | 11,467  |        |           |   | 11,248  |       
|Guaranteed preferred beneficial interests in the
Companys junior subordinated deferrable interest
debentures |                                                                                                      |                                            | 28,118    |                                           |           |      | 13,519    |        |           |      |        |        |           |   |        |        |           |   |        |       
|Shareholders equity                                                                                          |                                                                                                      |                                            | 137,929   |                                           |           |      | 133,554   |        |           |      | 123,695 |        |           |   | 105,882 |        |           |   | 99,348  |       
|                                                                                                              |                                                                                                      |                                            |           |                                           |           |      |           |        |           |      |         |        |           |   |         |        |           |   |         |       
|                                                                                                              |                                                                                                      | Total Liabilities and shareholders equity |           | $                                         | 1,508,308 |      |           | $      | 1,415,143 |      |         | $      | 1,115,823 |   |         | $      | 1,032,647 |   |         | $      | 1,015,909 | 
|                                                                                                              |                                                                                                      |                                            |           |                                           |           |      |           |        |           |      |         |        |           |   |         |        |           |   |         |       
|Book value per share                                                                                          |                                                                                                      | $                                          | 23.54     |                                           |           | $    | 20.05     |        |           | $    | 17.22   |        |           | $ | 14.77   |        |           | $ | 12.91   |       
|                                                                                                              |                                                                                                      |                                            |           |                                           |           |      |           |        |           |      |         |        |           |   |         |        |           |   |         |       



---

|(1) |  | Represents expenses related to the consolidation of the Banks headquarters
with ITLA Capitals headquarters in La Jolla, California.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------

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|                                                                                 |  |                                           |        |      |  |      |        |      |  |      |        |   |  |  |        |    |  |  |        |  
|-------------------------------------------------------------------------------- |  | ----------------------------------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ | - |  |  | ------ | -- |  |  | ------ | -
|                                                                                 |  | As of and for the Years Ended December 31
|                                                                                 |  |                                          
|                                                                                 |  | 2001                                      |        | 2000 |  | 1999 |        | 1998 |  | 1997
|                                                                                 |  |                                           |        |      |  |      |        |      |  |     
|Selected Performance Ratios                                                      |  |                                           |        |      |  |      |        |      |  |      |        |   |  |  |        |    |  |  |        |  
|Return on average assets                                                         |  |                                           | 1.32   | %    |  |      | 1.47   | %    |  |      | 1.57   | % |  |  | 1.46   | %  |  |  | 1.46   | %
|Return on average shareholders equity                                           |  |                                           | 13.28  | %    |  |      | 13.95  | %    |  |      | 14.23  | % |  |  | 13.95  | %  |  |  | 13.23  | %
|Net interest margin (1)                                                          |  |                                           | 4.33   | %    |  |      | 4.47   | %    |  |      | 5.11   | % |  |  | 4.96   | %  |  |  | 4.94   | %
|Average interest-earning assets to average
interest bearing liabilities          |  |                                           | 113.80 | %    |  |      | 113.49 | %    |  |      | 113.74 | % |  |  | 113.06 | %  |  |  | 112.15 | %
|Efficiency ratio (2)                                                             |  |                                           | 38.49  | %    |  |      | 38.62  | %    |  |      | 39.57  | % |  |  | 41.06  | %  |  |  | 42.96  | %
|Efficiency ratio excluding real estate
operations, and nonrecurring expense, net |  |                                           | 37.85  | %    |  |      | 35.94  | %    |  |      | 38.69  | % |  |  | 39.19  | %  |  |  | 41.96  | %
|Total recurring general and administrative
expense to average assets             |  |                                           | 1.66   | %    |  |      | 1.78   | %    |  |      | 2.01   | % |  |  | 2.04   | %  |  |  | 2.14   | %
|Average shareholders equity to average assets                                   |  |                                           | 9.93   | %    |  |      | 10.86  | %    |  |      | 11.01  | % |  |  | 10.47  | %  |  |  | 11.06  | %
|Nonperforming assets to total assets                                             |  |                                           | 1.92   | %    |  |      | 1.44   | %    |  |      | 0.81   | % |  |  | 0.64   | %  |  |  | 1.21   | %
|Allowance for loan losses to loans held for
investment, net (3)                  |  |                                           | 2.16   | %    |  |      | 2.12   | %    |  |      | 2.05   | % |  |  | 1.91   | %  |  |  | 1.60   | %
|Allowance for loan loss to nonaccrual loans                                      |  |                                           | 174.30 | %    |  |      | 149.85 | %    |  |      | 249.40 | % |  |  | 309.37 | %  |  |  | 146.16 | %
|Net charge-offs (recoveries) to average loans
held for investment, net           |  |                                           | 0.39   | %    |  |      | 0.18   | %    |  |      | 0.20   | % |  |  | (0.01  | %) |  |  | 0.28   | %



---

|(1) |  | Net interest margin represents net interest income divided by total
average interest-earning assets.                                     
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Efficiency ratio represents non-interest expense divided by non-interest
income and net interest income before provision for loan losses.
|   
|   
|   
|   
|(3) |  | Real estate loans before allowance for loan losses and net of unearned
finance charges and loan fees.                                    






|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

General

The following discussion and analysis reviews the financial condition and
results of our consolidated operations, including our consolidated
subsidiaries: Imperial Capital Bank and the Imperial Capital Real Estate
Investment Trust.

The following discussion and analysis is intended to identify the major
factors that influenced our financial condition as of December 31, 2001 and
2000 and our results of operations for the years ended December 31, 2001, 2000
and 1999. Our business involves the origination and purchase of loans secured
primarily by income producing real estate, located predominately in California
and, to a lesser extent, the purchase of franchise loans and pools of
non-conventional residential mortgage loans located throughout the United
States.

Consolidated net income in 2001 was $18.2 million, or $2.72 per diluted
share, compared to $18.1 million, or $2.51 per diluted share, in 2000 and $16.2
million, or $2.21 per diluted share, in 1999. The increase in net earnings in
2001 was primarily due to an increase in net interest income to $59.2 million
for 2001 as compared to $55.1 million in 2000, a decrease of $0.5 million in
provision for income taxes and a decrease of $0.2 million in provision for loan
losses. These items were partially offset by a $2.5 million increase in
minority interest in income of subsidiary, a decrease of $1.3 million in
non-interest income and an increase of $1.0 million in non-interest expense.



18



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The increase in net earnings in 2000 was primarily due to an increase in
net interest income to $55.1 million in 2000 compared to $52.8 million in 1999
and gain on sale of investment securities available for sale of $1.4 million in
2000. These items were partially offset by nonrecurring expenses of $1.4
million relating to the consolidation of the Banks headquarters with ITLA
Capitals headquarters in La Jolla, California and a $600,000 increase in
provision for income taxes.

The return on average assets was 1.32% in 2001 compared to 1.47% and 1.57%
in 2000 and 1999, respectively. The return on average shareholders equity was
13.28% in 2001 compared to 13.95% in 2000 and 14.23% in 1999. At December 31,
2001, our average total assets increased $139.6 million to $1.4 billion as
compared to $1.2 billion at December 31, 2000. During the year ended December
31, 2001, the Banks average loan portfolio increased $141.1 million to $1.1
billion as compared to $964.6 million in 2000 and average real estate loans
held in trust increased by $6.4 million to $189.3 million as compared to $183.0
million in 2000. These increases were partially offset by a $10.8 million
decrease in average cash and investment securities.

Total loan production, including the unfunded portion of construction
loans, was $502.1 million for the year ended December 31, 2001, consisting of
$285.7 million originated for the portfolio, $207.4 million purchased for the
portfolio, and $9.0 million brokered for outside investors, compared to total
loan production of $653.9 million and $394.3 million for the years ended
December 31, 2000 and 1999, respectively.

Average deposit accounts totaled $960.0 million in 2001 compared to $913.6
million in 2000, an increase of $46.4 million, or 5.1%. FHLB
advances averaged $103.7 million in 2001, compared to $30.4 million in 2000, an
increase of $73.3 million, or 241.1%. This increase in average deposits and
average FHLB advances was primarily utilized to fund the
increase in the loan portfolio. The average balance of the CMOs was $139.3
million during 2001 compared to $141.8 million in 2000.

Results of Operations

Net Interest Income

The following table presents, for the periods indicated, our condensed
average balance sheet information, together with interest income and yields
earned on average interest-earning assets and interest expense and rates paid
on average interest-bearing liabilities. Average balances are computed using
daily average balances. Nonaccrual loans are included in loans receivable.



19



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|                                                      |                                           |   |                         |           |         |   |         |         |         |  |         |      |        |   |           |           |         |   |         |         |  |  |       |       |   |   |           |           |  |   |         |        |  |  |       |       |  
|----------------------------------------------------- | ----------------------------------------- | - | ----------------------- | --------- | ------- | - | ------- | ------- | ------- |  | ------- | ---- | ------ | - | --------- | --------- | ------- | - | ------- | ------- |  |  | ----- | ----- | - | - | --------- | --------- |  | - | ------- | ------ |  |  | ----- | ----- | -
|                                                      |                                           |   | Years Ended December 31
|                                                      |                                           |   |                        
|                                                      |                                           |   | 2001                    |           | 2000    |   | 1999   
|                                                      |                                           |   |                         |           |         |   |        
|                                                      |                                           |   | Average                 |           | Income/ |   | Yield/  |         | Average |  | Income/ |      | Yield/ |   | Average   |           | Income/ |   | Yield/ 
|                                                      |                                           |   | Balance                 |           | Expense |   | Rate    |         | Balance |  | Expense |      | Rate   |   | Balance   |           | Expense |   | Rate   
|                                                      |                                           |   |                         |           |         |   |         |         |         |  |         |      |        |   |           |           |         |   |        
|                                                      |                                           |   | (dollars in thousands) 
|Assets                                                |                                           |   |                         |           |         |   |         |         |         |  |         |      |        |   |           |           |         |   |         |         |  |  |       |       |   |   |           |           |  |   |         |        |  |  |       |      
|Cash and investment securities                        |                                           | $ | 73,823                  |           |         | $ | 3,192   |         |         |  | 4.32    | %    |        | $ | 84,660    |           |         | $ | 5,164   |         |  |  | 6.10  | %     |   | $ | 106,953   |           |  | $ | 5,910   |        |  |  | 5.53  | %    
|Real estate loans (1)                                 |                                           |   | 1,105,748               |           |         |   | 104,949 |         |         |  | 9.49    | %    |        |   | 964,620   |           |         |   | 102,419 |         |  |  | 10.62 | %     |   |   | 925,059   |           |  |   | 95,303  |        |  |  | 10.30 | %    
|Real estate loans held in trust                       |                                           |   | 189,349                 |           |         |   | 14,954  |         |         |  | 7.90    | %    |        |   | 182,982   |           |         |   | 16,192  |         |  |  | 8.85  | %     |   |   |          |           |  |   |        |        |  |  |      |      
|                                                      |                                           |   |                         |           |         |   |         |         |         |  |         |      |        |   |           |           |         |   |         |         |  |  |       |       |   |   |           |           |  |   |         |        |  |  |       |      
|                                                      | Total loans receivable                    |   |                         | 1,295,097 |         |   |         | 119,903 |         |  |         | 9.26 | %      |   |           | 1,147,602 |         |   |         | 118,611 |  |  |       | 10.34 | % |   |           | 925,059   |  |   |         | 95,303 |  |  |       | 10.30 | %
|                                                      |                                           |   |                         |           |         |   |         |         |         |  |         |      |        |   |           |           |         |   |         |         |  |  |       |       |   |   |           |           |  |   |         |        |  |  |       |      
|Total interest earning assets                         |                                           |   | 1,368,920               |           |         | $ | 123,095 |         |         |  | 8.99    | %    |        |   | 1,232,262 |           |         | $ | 123,775 |         |  |  | 10.04 | %     |   |   | 1,032,012 |           |  | $ | 101,213 |        |  |  | 9.81  | %    
|                                                      |                                           |   |                         |           |         |   |         |         |         |  |         |      |        |   |           |           |         |   |         |         |  |  |       |       |   |   |           |           |  |   |         |        |  |  |       |      
|Non-interest-earning assets                           |                                           |   | 34,218                  |           |         |   |         |         |         |  |         |      |        |   | 28,963    |           |         |   |         |         |  |  |       |       |   |   | 20,456    |           |  |   |         |        |  |  |       |      
|Allowance for loan losses                             |                                           |   | (26,835                 | )         |         |   |         |         |         |  |         |      |        |   | (24,571   | )         |         |   |         |         |  |  |       |       |   |   | (18,298   | )         |  |   |         |        |  |  |       |      
|                                                      |                                           |   |                         |           |         |   |         |         |         |  |         |      |        |   |           |           |         |   |         |         |  |  |       |       |   |   |           |           |  |   |         |        |  |  |       |      
|                                                      | Total assets                              |   | $                       | 1,376,303 |         |   |         |         |         |  |         |      |        |   | $         | 1,236,654 |         |   |         |         |  |  |       |       |   |   | $         | 1,034,170 |  |   |         |        |  |  |       |       |  
|                                                      |                                           |   |                         |           |         |   |         |         |         |  |         |      |        |   |           |           |         |   |         |         |  |  |       |       |   |   |           |           |  |   |         |        |  |  |       |      
|Liabilities and Shareholders Equity                  |                                           |   |                         |           |         |   |         |         |         |  |         |      |        |   |           |           |         |   |         |         |  |  |       |       |   |   |           |           |  |   |         |        |  |  |       |      
|Deposit accounts:                                     |                                           |   |                         |           |         |   |         |         |         |  |         |      |        |   |           |           |         |   |         |         |  |  |       |       |   |   |           |           |  |   |         |        |  |  |       |      
|Money market and
passbook accounts                    |                                           | $ | 119,022                 |           |         | $ | 4,767   |         |         |  | 4.01    | %    |        | $ | 115,035   |           |         | $ | 6,384   |         |  |  | 5.55  | %     |   | $ | 130,995   |           |  | $ | 6,477   |        |  |  | 4.95  | %    
|Time certificates                                     |                                           |   | 841,002                 |           |         |   | 48,097  |         |         |  | 5.72    | %    |        |   | 798,599   |           |         |   | 49,584  |         |  |  | 6.21  | %     |   |   | 739,111   |           |  |   | 39,975  |        |  |  | 5.41  | %    
|                                                      |                                           |   |                         |           |         |   |         |         |         |  |         |      |        |   |           |           |         |   |         |         |  |  |       |       |   |   |           |           |  |   |         |        |  |  |       |      
|                                                      | Total deposit accounts                    |   |                         | 960,024   |         |   |         | 52,864  |         |  |         | 5.51 | %      |   |           | 913,634   |         |   |         | 55,968  |  |  |       | 6.13  | % |   |           | 870,106   |  |   |         | 46,452 |  |  |       | 5.34  | %
|Collateralize mortgage obligations                    |                                           |   | 139,267                 |           |         |   | 6,209   |         |         |  | 4.46    | %    |        |   | 141,796   |           |         |   | 10,901  |         |  |  | 7.69  | %     |   |   |          |           |  |   |        |        |  |  |      | %    
|FHLB Advances                                         |                                           |   | 103,675                 |           |         |   | 4,790   |         |         |  | 4.62    | %    |        |   | 30,366    |           |         |   | 1,773   |         |  |  | 5.84  | %     |   |   | 37,235    |           |  |   | 2,008   |        |  |  | 5.39  | %    
|                                                      |                                           |   |                         |           |         |   |         |         |         |  |         |      |        |   |           |           |         |   |         |         |  |  |       |       |   |   |           |           |  |   |         |        |  |  |       |      
|Total interest bearing liabilities                    |                                           |   | 1,202,966               |           |         | $ | 63,863  |         |         |  | 5.31    | %    |        |   | 1,085,796 |           |         | $ | 68,642  |         |  |  | 6.32  | %     |   |   | 907,341   |           |  | $ | 48,460  |        |  |  | 5.34  | %    
|                                                      |                                           |   |                         |           |         |   |         |         |         |  |         |      |        |   |           |           |         |   |         |         |  |  |       |       |   |   |           |           |  |   |         |        |  |  |       |      
|Noninterest-bearing liabilities                       |                                           |   | 36,644                  |           |         |   |         |         |         |  |         |      |        |   | 16,586    |           |         |   |         |         |  |  |       |       |   |   | 12,966    |           |  |   |         |        |  |  |       |      
|Shareholders equity                                  |                                           |   | 136,693                 |           |         |   |         |         |         |  |         |      |        |   | 134,272   |           |         |   |         |         |  |  |       |       |   |   | 113,863   |           |  |   |         |        |  |  |       |      
|                                                      |                                           |   |                         |           |         |   |         |         |         |  |         |      |        |   |           |           |         |   |         |         |  |  |       |       |   |   |           |           |  |   |         |        |  |  |       |      
|                                                      | Total liabilities and
shareholdersequity |   | $                       | 1,376,303 |         |   |         |         |         |  |         |      |        |   | $         | 1,236,654 |         |   |         |         |  |  |       |       |   |   | $         | 1,034,170 |  |   |         |        |  |  |       |       |  
|                                                      |                                           |   |                         |           |         |   |         |         |         |  |         |      |        |   |           |           |         |   |         |         |  |  |       |       |   |   |           |           |  |   |         |        |  |  |       |      
|Net interest spread (2)                               |                                           |   |                         |           |         |   |         |         |         |  | 3.68    | %    |        |   |           |           |         |   |         |         |  |  | 3.72  | %     |   |   |           |           |  |   |         |        |  |  | 4.47  | %    
|                                                      |                                           |   |                         |           |         |   |         |         |         |  |         |      |        |   |           |           |         |   |         |         |  |  |       |       |   |   |           |           |  |   |         |        |  |  |       |      
|Net interest income before
provisions for loan losses |                                           |   |                         |           |         | $ | 59,232  |         |         |  |         |      |        |   |           |           |         | $ | 55,133  |         |  |  |       |       |   |   |           |           |  | $ | 52,753  |        |  |  |       |      
|                                                      |                                           |   |                         |           |         |   |         |         |         |  |         |      |        |   |           |           |         |   |         |         |  |  |       |       |   |   |           |           |  |   |         |        |  |  |       |      
|Net interest margin (3)                               |                                           |   |                         |           |         |   |         |         |         |  | 4.33    | %    |        |   |           |           |         |   |         |         |  |  | 4.47  | %     |   |   |           |           |  |   |         |        |  |  | 5.11  | %    
|                                                      |                                           |   |                         |           |         |   |         |         |         |  |         |      |        |   |           |           |         |   |         |         |  |  |       |       |   |   |           |           |  |   |         |        |  |  |       |      



---

|(1) |  | Before allowance for loan losses and net of deferred loan fees and costs.
Net loan fee amortization of $1.3 million, $1.7 million and $2.5 million
was included in net interest income for 2001, 2000 and 1999, respectively.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Average yield on interest-earning assets minus average rate paid on
interest-bearing liabilities.                                                                                                                            
|   
|   
|   
|   
|(3) |  | Net interest income divided by total average interest-earning assets.                                                                                                                                                        

Our primary source of revenue is net interest income. Our net interest
income is affected by (a) the difference between the yields recognized on
interest-earning assets, including loans and investments, and the interest
rates paid on interest-bearing liabilities, which is referred to as net
interest spread, and (b) the relative amounts of interest-earning assets and
interest-bearing liabilities. For 2001, 2000 and 1999, our ratio of average
interest-earning assets to average interest-bearing liabilities was 113.80%,
113.49% and 113.74%, respectively.

The following table sets forth a summary of the changes in interest income
and interest expense resulting from changes in average interest-earning asset
and interest-bearing liability balances and changes in average interest rates.
The change in interest due to both volume and rate has been allocated to change
due to volume and rate in proportion to the relationship of the absolute dollar
amounts of each.



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|                                             |                                     |                                 |                                               |                                         |        |                     |         |                     |         |         |        |        |        |        |        |        |        |        |       |       |       |       |        |        |        |        |       | 
|-------------------------------------------- | ----------------------------------- | ------------------------------- | --------------------------------------------- | --------------------------------------- | ------ | ------------------- | ------- | ------------------- | ------- | ------- | ------ | ------ | ------ | ------ | ------ | ------ | ------ | ------ | ----- | ----- | ----- | ----- | ------ | ------ | ------ | ------ | ----- | 
|                                             |                                     |                                 |                                               |                                         |        | 2001 vs. 2000       |         | 2000 vs. 1999      
|                                             |                                     |                                 |                                               |                                         |        |                     |         |                    
|                                             |                                     |                                 |                                               |                                         |        | Increase (Decrease) |         | Increase (Decrease)
|                                             |                                     |                                 |                                               |                                         |        | Due to:             |         | Due to:            
|                                             |                                     |                                 |                                               |                                         |        |                     |         |                    
|                                             |                                     |                                 |                                               |                                         |        | Volume              |         | Rate                |         | Total   |        | Volume |        | Rate   |        | Total 
|                                             |                                     |                                 |                                               |                                         |        |                     |         |                     |         |         |        |        |        |        |        |       
|                                             |                                     |                                 |                                               |                                         |        | (in thousands)     
|Interest and fees earned on:                 |                                     |                                 |                                               |                                         |        |                     |         |                     |         |         |        |        |        |        |        |        |        |        |       |       |       |       |        |       
|                                             |                                     | Real estate loans, net          |                                               | $                                       | 13,414 |                     |         | $                   | (10,884 | )       |        | $      | 2,530  |        |        | $      | 4,175  |        |       | $     | 2,941 |       |        | $      | 7,116  |       
|                                             |                                     | Cash and investment securities  |                                               |                                         | (467   | )                   |         |                     | (1,505  | )       |        |        | (1,972 | )      |        |        | (1,357 | )      |       |       | 611   |       |        |        | (746   | )     
|                                             |                                     | Real estate loans held in trust |                                               |                                         | 502    |                     |         |                     | (1,740  | )       |        |        | (1,238 | )      |        |        | 16,192 |        |       |       |      |       |        |        | 16,192 |       
|                                             |                                     |                                 |                                               |                                         |        |                     |         |                     |         |         |        |        |        |        |        |        |        |        |       |       |       |       |        |       
|Total increase (decrease) in
interest income |                                     |                                 | 13,449                                        |                                         |        |                     | (14,129 | )                   |         |         | (680   | )      |        |        | 19,010 |        |        |        | 3,552 |       |       |       | 22,562 |       
|                                             |                                     |                                 |                                               |                                         |        |                     |         |                     |         |         |        |        |        |        |        |        |        |        |       |       |       |       |        |       
|Interest paid on:                            |                                     |                                 |                                               |                                         |        |                     |         |                     |         |         |        |        |        |        |        |        |        |        |       |       |       |       |        |       
|                                             | Deposit accounts                    |                                 |                                               | 2,557                                   |        |                     |         | (5,661              | )       |         |        | (3,104 | )      |        |        | 2,661  |        |        |       | 6,855 |       |       |        | 9,516  |       
|                                             | Collateralized mortgage obligations |                                 |                                               | (113                                    | )      |                     |         | (4,579              | )       |         |        | (4,692 | )      |        |        | 10,901 |        |        |       |      |       |       |        | 10,901 |       
|                                             | FHLB advances                       |                                 |                                               | 3,387                                   |        |                     |         | (370                | )       |         |        | 3,017  |        |        |        | (402   | )      |        |       | 167   |       |       |        | (235   | )     
|                                             |                                     |                                 |                                               |                                         |        |                     |         |                     |         |         |        |        |        |        |        |        |        |        |       |       |       |       |        |       
|                                             |                                     |                                 | Total increase (decrease) in
interest expense |                                         |        | 5,831               |         |                     |         | (10,610 | )      |        |        | (4,779 | )      |        |        | 13,160 |       |       |       | 7,022 |        |        |        | 20,182 |      
|                                             |                                     |                                 |                                               |                                         |        |                     |         |                     |         |         |        |        |        |        |        |        |        |        |       |       |       |       |        |       
|                                             |                                     |                                 |                                               | Increase (decrease) net
interest income |        | $                   | 7,618   |                     |         | $       | (3,519 | )      |        | $      | 4,099  |        |        | $      | 5,850 |       |       | $     | (3,470 | )      |        | $      | 2,380 | 
|                                             |                                     |                                 |                                               |                                         |        |                     |         |                     |         |         |        |        |        |        |        |        |        |        |       |       |       |       |        |       

2001 Compared to 2000

Net interest income increased $4.1 million or 7.4% to $59.2 million in
2001 compared to $55.1 million in 2000. The increase in net interest income
was primarily attributable to the improvement in net interest spread realized
by the REIT due to its liability sensitive position as its liabilities repriced
faster than its assets during the year. The net interest income of the Bank
increased as the interest income attributable to the growth in the
average balance of its loan portfolio was offset by the spread compression
experienced due to the general market decline in interest rates during the
year.

Interest income
decreased $680,000 or 0.5% to $123.1 million in 2001
compared to $123.8 million in 2000. The decrease in interest income was due
primarily to a $2.0 million decrease in interest income from cash and
investment securities and a $1.2 million decrease in interest income from real
estate loans held in trust, partially offset by a $2.5 million increase in
interest income from real estate loans. Interest and fee income from real
estate loans increased due to higher loan volume in 2001, partially offset by a
decrease in loan yield. The average balance of the Banks real estate loans
increased $141.1 million to $1.11 billion in 2001 compared to $964.6 million in
2000. The average yield on these real estate loans was 9.49% in 2001 compared
to 10.62% in 2000. The average balance of the real estate loans held in trust
increased $6.4 million to $189.3 million in 2001 compared to $183.0 million in
2000. The average yield on these loans was 7.90% in 2001 compared to 8.85% in
2000.
The decrease in the yield on real estate
loans was primarily due to the repricing of variable rate loans at lower
interest rates resulting from the general decline in market interest rates.
Our commercial real estate loan portfolio is primarily comprised of adjustable
rate mortgages indexed to the six month LIBOR. Approximately 92.8% of our real
estate loan portfolio (including real estate loans held in trust) are
adjustable rate mortgages at December 31, 2001. These adjustable rate mortgages
generally reprice on a quarterly basis and approximately $1.1 billion or 94.1%
of our real estate loan portfolio contain interest rate floors, below which the
loans contractual interest rate may not adjust. At December 31, 2001, the
weighted average floor interest rate of these loans was 8.97%. At that date,
approximately $1.1 billion or 95.5% of those loans were at the floor interest
rate, approximately $41.4 million or 3.7% were within 50 basis points of their
floor interest rate, and approximately $46.6 million or 4.2% were greater than
50 but less than 100 basis points from their floor interest rate.
Excluding this income from prepayments, the yields on the Banks
real estate loans would have been 9.30% in 2001 and 10.34% in 2000 and the
yields on the real estate loans held in trust would have been 7.81% in 2001 and
8.65% in 2000.

Interest income from cash and investments decreased to $3.2 million in
2001 compared to $5.2 million in 2000, due primarily to a decrease in yield and
a decrease in the average outstanding balance. The average balance of cash and
investment securities decreased $10.9 million or 12.9% to $73.8 million in 2001
compared to $84.7 million in 2000. The average yield on cash and investment
securities was 4.32% in 2001 compared to 6.10% in 2000, which was consistent
with the decrease in short-term market interest rates.



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Interest expense on interest-bearing liabilities decreased $4.8 million or
6.9% to $63.9 million in 2001 compared to $68.6 million in 2000 primarily due
to a decrease in interest expense on deposits and CMOs partially offset by an
increase in interest expense on FHLB advances. Interest
expense from deposit accounts decreased $3.1 million or 5.5% to $52.9 million
in 2001 compared to $56.0 million in 2000 due to decreases in the average rate
paid on deposits. The average rate paid on deposits was 5.51% in 2001 compared
to 6.13% in 2000. The average balance of deposits increased $46.4 million or
5.1% to $960.0 million in 2001 compared to $913.6 million in 2000 as we
increased deposits to fund growth in the loan portfolio.

Interest expense from the CMOs decreased $4.7 million or 43.1% to $6.2
million in 2001 as compared to $10.9 million in 2000. The decrease is
primarily due to a decrease in rates paid on CMOs partially offset by a higher
average balance of CMOs. The average balance and average yield on the CMOs
was $139.3 million and 4.46% in 2001 as compared to $141.8 million and 7.69% in
2000, respectively.

Interest expense from FHLB advances increased $3.0
million to $4.8 million in 2001 compared to $1.8 million in 2000, due to an
increase in the average outstanding balance partially offset by a decrease in
the average rate paid on FHLB advances. The average balance
of FHLB advances increased $73.3 million or 241.4% to $103.7
million in 2001 compared to $30.4 million in 2000. The average rate paid on
FHLB advances was 4.62% in 2001 compared to 5.84% in 2000.

Provision for Loan losses

Provision for loan losses decreased to $4.6 million in 2001 compared to
$4.8 million in 2000. The decrease in the provision for loan losses was due to
the reduction in our nonperforming loans to 1.17% of total gross loans at
December 31, 2001, compared to 1.42% of total gross loans as of December 31,
2000, and the decline in other loans
of concern of $49.4 million since December 31, 2000. In addition,
the provision also
reflects the reallocation of $2.7 million of allowance for loan losses from the
Imperial Capital REIT to the Bank, as actual loan losses related to real estate
loans held in trust have been negligible, and this loan portfolio has decreased
due to principal payments. See also Credit Risk Elements  Allowance for Loan
Losses and Nonperforming Assets.

Non-interest Income

Non-interest income decreased $1.2 million to $1.1 million in 2001
compared to $2.3 million in 2000. The decrease in non-interest income was due
primarily to a $1.4 million gain realized on the sale investment securities in
2000. Excluding this gain on sale of investment securities in 2000, other
non-interest income increased slightly to $1.1 million in 2001 compared to
$919,000 in 2000.

Non-interest Expense

General and Administrative Expense

General and administrative expense totaled $22.8 million and $22.1 million
in 2001 and 2000, respectively. In 2001, our ratio of recurring general and
administrative expenses to average assets was 1.66%, compared to 1.78% in 2000,
respectively. Our efficiency ratio, excluding real estate owned and
nonrecurring expenses, was 37.85% in 2001 compared to 35.94% in 2000,
respectively.

General and
administrative expense increased $764,000 to $22.8
million in 2001 compared to $22.1 million in 2000. The previous years
non-interest expense included a $1.4 million non-recurring charge relating to
the consolidation of the Banks headquarters with ITLA Capitals headquarters
in La Jolla, California. Compensation and benefits expense totaled $11.8
million in 2001 compared to $10.0 million in 2000. The increase in
compensation and benefits expense was primarily due to additions made to the
retail and wholesale loan originations sales and support staff. Full time
equivalent associates averaged 133 in 2001 compared to 122 in 2000.



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Real Estate Owned Expense

Real estate owned expense, net, increased to $387,000 in 2001 compared to
$138,000 in 2000. The increase in real estate owned expense in 2001 compared
to 2000 was primarily due to the increase in the outstanding balance of other
real estate owned (OREO) to $13.7 million at December 31, 2001 compared to
$2.3 million at December 31, 2000. The increase in OREO during 2001 was
primarily related to three commercial properties. Provision for losses on
other real estate owned totaled $269,000 in 2001 compared to $167,000 in 2000.
Other real estate owned expense was $136,000 in 2001 compared to income of
$31,000 in 2000. There was a net gain of $18,000 from sales of other real
estate owned in 2001 compared to a net loss of $2,000 in 2000. See also Credit
Risk Elements  Allowance for Loan Losses and
Nonperforming Assets.

Income Taxes

Provision for income taxes decreased to $11.4 million in 2001 compared to
$11.9 million in 2000. The decrease in provision for income taxes was
primarily due to a lower effective tax rate. The effective tax rate was 38.6%
and 39.6% for 2001 and 2000, respectively. The effective tax rate differed
from the applicable statutory federal tax rate due to state income taxes and
the state income tax deduction for tax exempt income on loans located in
designated redevelopment and enterprise zones and due to federal income tax
credits received from a low income housing tax credit investment.

At December 31, 2001, we had a net deferred tax asset of $11.9 million.
The deferred tax asset related primarily to loss provisions recognized on our
financial statements that have not yet been recognized on our income tax
returns. During 2001, we had no deferred tax assets relating to net operating
loss carry forward deductions. The deferred tax asset is considered fully
realizable, as when the temporary differences associated with the deferred tax
assets are recognized for income tax purposes, those deductions are expected to
be fully offset, either by carryback against previously taxed income or by a
reduction of future taxable income. Accordingly, we have not established a
valuation allowance on the deferred tax asset.

Minority Interest in Income of Subsidiary

Minority interest in income of subsidiary, consisting of accrued
distributions payable on our Trust Preferred securities, was $3.0 million in
2001 as compared to $478,000 in 2000. The increase in the minority interest in
income of subsidiary is due to an additional issuance of Trust Preferred
securities in 2001 as well as the Trust Preferred securities issued in
September 2000 being outstanding for all of 2001. See Item 8. Financial
Statements and Supplementary Data  Notes to Consolidated Financial Statements
 Note 9.

2000 Compared to 1999

Net interest income increased $2.3 million or 4.4% to $55.1 million in
2000 compared to $52.8 million in 1999. The increase in net interest income
was due primarily to net interest income related to the acquisition of the
ICCMAC Trust and an increase in interest income on our loans. These items were
partially offset by an increase in interest expense on deposits and a decrease
in interest income on investment securities.

Interest income increased $22.6 million or 22.3% to $123.8 million in 2000
compared to $101.2 million in 1999. The increase in interest income was due
primarily to a $7.1 million increase in real estate loan income to $102.4
million and the acquisition of the ICCMAC Trust, which generated $16.2 million
in interest income. Interest and fee income from loans increased due to higher
loan volume in 2000 and an increase in loan yield. The average balance of the
Banks real estate loans increased $39.6 million to $964.6 million in 2000
compared to $925.1 million in 1999. The average yield on these real estate
loans was 10.62% in 2000 compared to 10.30% in 1999. The increase in yield was
due to increases in market interest rates which increased the yield of our
adjustable rate loans upon repricing and increased the yields received on loans added to
the portfolio during the year. Interest and fee
income earned on real estate loans in 2000 and 1999 includes income recognized
from the early payoff of loans. Excluding this income from prepayments, the
yields on the Banks real estate loans would have been 10.34% in 2000 and
10.06% in 1999.



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Interest income from cash and investments decreased to $5.2 million in
2000 compared to $5.9 million in 1999, due primarily to a decrease in the
average outstanding balance, partially offset by an increase in yield. The
average balance of cash and investment securities decreased $22.3 million or
20.8% to $84.7 million in 2000 compared to $106.9 million in 1999. The average
yield on cash and investment securities was 6.10% in 2000 compared to 5.53% in
1999, which was consistent with the increase in short-term market interest
rates.

Interest expense increased $20.1 million or 41.4% to $68.6 million in 2000
compared to $48.5 million in 1999 primarily due to increases in interest
expense on deposits and the addition of the CMOs, partially offset by a
decrease in interest expense on FHLB advances. Interest
expense from deposit accounts increased $9.5 million or 20.4% to $56.0 million
in 2000 compared to $46.5 million in 1999 due to increases in the average rate
paid on deposits and to a lesser extent the average balance of deposit
accounts. The average rate paid on deposits was 6.13% in 2000 compared to
5.34% in 1999. The average balance of deposits increased $43.5 million or 5.0%
to $913.6 million in 2000 compared to $870.1 million in 1999 as we increased
deposits to fund growth in the loan portfolio.

Interest expense from the CMOs totaled to $10.9 million in 2000. The
average balance and average yield on the CMOs from the date of acquisition
through December 31, 2000 was $141.8 million and 7.69%, respectively.

Interest expense from FHLB advances decreased $200,000
to $1.8 million in 2000 compared to $2.0 million in 1999, due to a decrease in
the average outstanding balance partially offset by an increase in the average
rate paid on FHLB advances. The average balance of FHLB advances decreased $6.8 million or 18.3% to $30.4 million in
2000 compared to $37.2 million in 1999. The average rate paid on FHLB advances was 5.84% in 2000 compared to 5.39% in 1999.

Provision for Loan losses

Provision for loan losses decreased slightly to $4.8 million in 2000
compared to $5.0 million in 1999. The provision in 2000 reflects the growth in
loans held by us including the increase in purchased residential loans.
Generally, we consider first mortgage loans on one-four family owner occupied
residential properties to involve a lesser degree of risk than loans secured by
commercial real estate properties. Purchased residential loans increased to
$134.1 million at December 31, 2000 compared to $90.6 million at December 31,
1999. Additionally, the provision was due to the increase in our nonperforming
loans to 1.42% of total gross loans at December 31, 2000, compared to 0.82% of
total gross loans as of December 31, 1999. See also Credit Risk Elements 
Allowance for Loan Losses and Nonperforming Assets.

Non-interest Income

Non-interest income increased $1.4 million to $2.3 million in 2000
compared to $901,000 in 1999. The increase in non-interest income was due
primarily to a $1.4 million gain realized on the sale investment securities.
Excluding this gain on sale of investment securities in 2000, other
non-interest income increased slightly to $919,000 in 2000 compared to $901,000
in 1999.

Non-interest Expense

General and Administrative Expense

General and administrative expense totaled $22.1 million and $20.8 million
in 2000 and 1999, respectively. In 2000, our ratio of recurring general and
administrative expenses to average assets was 1.78%, compared to 2.01% in 1999, respectively. Our efficiency ratio, excluding real estate owned
and nonrecurring expenses, was 35.94% in 2000 compared to 38.69% in 1999,
respectively.

General and administrative expense increased $1.3 million to $22.1 million
in 2000 compared to $20.8 million in 1999. The increase in non-interest
expense was due primarily to $1.4 million of non-recurring general and
administrative expenses recorded in the first quarter of 2000 related to the
consolidation of the Banks headquarters with ITLA Capitals headquarters in La
Jolla, California. Excluding this non-recurring relocation expense, general
and administrative expenses did not change significantly in 2000 as compared to
1999.



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##### Table of Contents



Real Estate Owned Expense

Real estate owned expense, net, decreased to $138,000 in 2000 compared to
$472,000 in 1999. The decrease in real estate owned expense in 2000 compared
to 1999 was primarily due to a decrease in losses from the accelerated
disposition of other real estate owned in 1999. The outstanding balance of
other real estate owned was $2.3 million at December 31, 2000 compared to $1.0
million at December 31, 1999. Provision for losses on other real estate owned
totaled $167,000 in 2000 compared to $195,000 in 1999. Other real estate owned
income was $31,000 in 2000 compared to expenses of $72,000 in 1999. The net
loss from sales of other real estate owned decreased to $2,000 in 2000 compared
to $205,000 in 1999.

Income Taxes

Provision for income taxes increased to $11.9 million in 2000 compared to
$11.3 million in 1999. The increase in provision for income taxes was due to
the increase in pretax net income partially offset by tax exempt income on
loans located in designated redevelopment and enterprise zones and federal tax
credits received from a low income housing tax credit investment in 2000. The
effective tax rate was 39.6% and 41.0% for 2000 and 1999, respectively.

Minority Interest in Income of Subsidiary

Minority interest in income of subsidiary, consisting of accrued
distributions payable on our Trust Preferred securities, was $478,000 in 2000.
See Note 9 to the Consolidated Financial Statements for further information.

Financial Condition

At December 31, 2001 Compared with December 31, 2000

Total assets increased by $93.2 million, or 6.6%, to $1.5 billion at
December 31, 2001 compared to $1.4 billion at December 31, 2000. This increase
was primarily due to a $63.3 million, or 89.2%, increase in cash and cash
equivalents to $134.2 million at December 31, 2001 from $71.0 million at
December 31, 2000 and a $76.4 million, or 7.31%, increase in net real estate
loans receivable to $1.1 billion at December 31, 2001 from $1.0 billion at
December 31, 2000. Asset growth also included increases in FHLB Stock of $9.5 million and other real estate owned, net, of $11.5 million.
These increases were partially offset by the reduction in net real estate
loans held in trust of $49.5 million and investment securities available for
sale of $16.9 million. The growth in assets was funded primarily by an increase
in FHLB advances of $190.0 million partially offset by a
decrease in deposits of $62.0 million. The decrease in deposits was primarily
concentrated in time certificates, which decreased $117.3 million and was
partially offset by an increase in money market and passbooks of $55.3 million,
as depositors moved their investments to liquid and short term accounts during
the declining market rate environment. CMOs decreased from $161.9 million at
December 31, 2000 to $109.6 million at December 31, 2001. Shareholders equity
increased primarily due to the retention of $18.2 million of net income as
retained earnings for the year, partially offset by the purchase of $14.7
million of ITLA Capitals stock currently held as treasury stock.



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Real Estate Loans

At December 31, 2000 Compared with December 31, 1999

Total assets increased by $299.3 million, or 26.8%, to $1.4 billion at
December 31, 2000 compared to $1.1 billion at December 31, 1999. This increase
was primarily due to a $306.2 million, or 32.2%, increase in net real estate
loans receivable, including real estate loans held in trust, to $1.3 billion at
December 31, 2000 from $951.5 million at December 31, 1999. Asset growth also
included increases in interest receivable of $4.4 million, deferred income
taxes of $1.9 million, other real estate owned, net, of $1.2 million and other
assets of $5.3 million. These increases were partially offset by reductions in
investment securities available for sale of $12.9 million, cash and cash
equivalents of $1.3 million, FHLB stock of $4.9 million, and
premises and equipment, net, of $563,000. The growth in assets was funded
primarily by an increase in deposits of $102.1 million and CMOs of $161.9
million. Deposit growth was concentrated in time certificates, which increased
from $787.1 million at December 31, 1999 to $912.8 million at December 31,
2000, partially offset by a decrease in money market and passbook accounts,
which decreased from $126.5 million at December 31, 1999 to $102.9 million at
December 31, 2000. Shareholders equity increased primarily due to the
retention of $18.1 million of net income as retained earnings for the year,
partially offset by the purchase of $7.7 million of ITLA Capitals stock
currently held as treasury stock and a $615,000 decrease in accumulated other
comprehensive income.

The following table shows the comparison of our real estate loan portfolio
by major categories as of the dates indicated.

|                                                                        |  |                |           |      |  |      |           |      |  |      |         |   |  |   |         |   |  |   |         |  
|----------------------------------------------------------------------- |  | -------------- | --------- | ---- |  | ---- | --------- | ---- |  | ---- | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                                                        |  | December 31   
|                                                                        |  |               
|                                                                        |  | 2001           |           | 2000 |  | 1999 |           | 1998 |  | 1997
|                                                                        |  |                |           |      |  |      |           |      |  |     
|                                                                        |  | (in thousands)
|Real Estate Loans                                                       |  |                |           |      |  |      |           |      |  |      |         |   |  |   |         |   |  |   |         |  
|Real estate loans                                                       |  | $              | 1,191,688 |      |  | $    | 1,176,988 |      |  | $    | 864,048 |   |  | $ | 811,076 |   |  | $ | 727,479 |  
|Construction loans                                                      |  |                | 54,129    |      |  |      | 95,206    |      |  |      | 107,833 |   |  |   | 71,385  |   |  |   | 39,668  |  
|Franchise loans                                                         |  |                | 57,617    |      |  |      | 3,912     |      |  |      |        |   |  |   |        |   |  |   |        |  
|                                                                        |  |                |           |      |  |      |           |      |  |      |         |   |  |   |         |   |  |   |         |  
|                                                                        |  |                | 1,303,434 |      |  |      | 1,276,106 |      |  |      | 971,881 |   |  |   | 882,461 |   |  |   | 767,147 |  
|Unamortized premium                                                     |  |                | 9,773     |      |  |      | 11,300    |      |  |      | 2,590   |   |  |   |        |   |  |   |        |  
|Deferred loan origination fees
and costs                                |  |                | (2,029    | )    |  |      | (2,571    | )    |  |      | (3,096  | ) |  |   | (3,561  | ) |  |   | (4,116  | )
|                                                                        |  |                |           |      |  |      |           |      |  |      |         |   |  |   |         |   |  |   |         |  
|                                                                        |  |                | 1,311,178 |      |  |      | 1,284,835 |      |  |      | 971,375 |   |  |   | 878,900 |   |  |   | 763,031 |  
|Allowance for loan losses                                               |  |                | (26,650   | )    |  |      | (27,186   | )    |  |      | (19,895 | ) |  |   | (16,811 | ) |  |   | (12,178 | )
|                                                                        |  |                |           |      |  |      |           |      |  |      |         |   |  |   |         |   |  |   |         |  
|                                                                        |  | $              | 1,284,528 |      |  | $    | 1,257,649 |      |  | $    | 951,480 |   |  | $ | 862,089 |   |  | $ | 750,853 |  
|                                                                        |  |                |           |      |  |      |           |      |  |      |         |   |  |   |         |   |  |   |         |  
|Real Estate Loans Held for Sale
(at lower of cost or fair
market value) |  |                |           |      |  |      |           |      |  |      |         |   |  |   |         |   |  |   |         |  
|Real estate loans                                                       |  | $              |          |      |  | $    |          |      |  | $    |        |   |  | $ | 12,188  |   |  | $ | 50,786  |  
|                                                                        |  |                |           |      |  |      |           |      |  |      |         |   |  |   |         |   |  |   |         |  
|Gross loans held for sale                                               |  |                |          |      |  |      |          |      |  |      |        |   |  |   | 12,188  |   |  |   | 50,786  |  
|Deferred loan origination fees
and costs                                |  |                |          |      |  |      |          |      |  |      |        |   |  |   |        |   |  |   | (242    | )
|                                                                        |  |                |           |      |  |      |           |      |  |      |         |   |  |   |         |   |  |   |         |  
|Net loans held for sale                                                 |  | $              |          |      |  | $    |          |      |  | $    |        |   |  | $ | 12,188  |   |  | $ | 50,544  |  
|                                                                        |  |                |           |      |  |      |           |      |  |      |         |   |  |   |         |   |  |   |         |  
|Total Real Estate Loans                                                 |  |                |           |      |  |      |           |      |  |      |         |   |  |   |         |   |  |   |         |  
|Real estate loans                                                       |  |                | 1,191,688 |      |  |      | 1,176,988 |      |  |      | 864,048 |   |  |   | 823,264 |   |  |   | 778,265 |  
|Construction loans                                                      |  |                | 54,129    |      |  |      | 95,206    |      |  |      | 107,833 |   |  |   | 71,385  |   |  |   | 39,668  |  
|Franchise loans                                                         |  |                | 57,617    |      |  |      | 3,912     |      |  |      |        |   |  |   |        |   |  |   |        |  
|                                                                        |  |                |           |      |  |      |           |      |  |      |         |   |  |   |         |   |  |   |         |  
|                                                                        |  |                | 1,303,434 |      |  |      | 1,276,106 |      |  |      | 971,881 |   |  |   | 894,649 |   |  |   | 817,933 |  
|Unamortized premium                                                     |  |                | 9,773     |      |  |      | 11,300    |      |  |      | 2,590   |   |  |   |        |   |  |   |         |  
|Deferred loan origination fees
and costs                                |  |                | (2,029    | )    |  |      | (2,571    | )    |  |      | (3,096  | ) |  |   | (3,561  | ) |  |   | (4,358  | )
|                                                                        |  |                |           |      |  |      |           |      |  |      |         |   |  |   |         |   |  |   |         |  
|                                                                        |  |                | 1,311,178 |      |  |      | 1,284,835 |      |  |      | 971,375 |   |  |   | 891,088 |   |  |   | 813,575 |  
|Allowance for loan losses                                               |  |                | (26,650   | )    |  |      | (27,186   | )    |  |      | (19,895 | ) |  |   | (16,811 | ) |  |   | (12,178 | )
|                                                                        |  |                |           |      |  |      |           |      |  |      |         |   |  |   |         |   |  |   |         |  
|Consolidated net loans receivable                                       |  | $              | 1,284,528 |      |  | $    | 1,257,649 |      |  | $    | 951,480 |   |  | $ | 874,277 |   |  | $ | 801,397 |  
|                                                                        |  |                |           |      |  |      |           |      |  |      |         |   |  |   |         |   |  |   |         |  



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The approximate contractual maturities of our loan portfolio at December
31, 2001 are as follows:

|                                   |                                         |   |                        |      |            |   |           |      |         |   |           |      |   |   |           |      |  
|---------------------------------- | --------------------------------------- | - | ---------------------- | ---- | ---------- | - | --------- | ---- | ------- | - | --------- | ---- | - | - | --------- | ---- | -
|                                   |                                         |   | Loans Maturing in      |      |            |   |          
|                                   |                                         |   |                        |      |            |   |          
|                                   |                                         |   |                        |      |            |   | Between   |      | Greater |   |           |      |  
|                                   |                                         |   | Less Than              |      | One and    |   | Than Five |      |         |   |          
|                                   |                                         |   | One Year               |      | Five Years |   | Years     |      | Total  
|                                   |                                         |   |                        |      |            |   |           |      |        
|                                   |                                         |   | (dollars in thousands) |      |            |   |          
|Real estate loans                  |                                         | $ | 67,692                 |      |            | $ | 121,553   |      |         | $ | 1,002,443 |      |   | $ | 1,191,688 |     
|Construction loans                 |                                         |   | 38,511                 |      |            |   | 14,211    |      |         |   | 1,407     |      |   |   | 54,129    |     
|Franchise loans                    |                                         |   |                       |      |            |   |          |      |         |   | 57,617    |      |   |   | 57,617    |     
|                                   |                                         |   |                        |      |            |   |           |      |         |   |           |      |   |   |           |     
|                                   |                                         | $ | 106,203                |      |            | $ | 135,764   |      |         | $ | 1,061,467 |      |   | $ | 1,303,434 |     
|                                   |                                         |   |                        |      |            |   |           |      |         |   |           |      |   |   |           |     
|Loans with fixed interest rates    |                                         | $ | 1,360                  |      |            | $ | 3,477     |      |         | $ | 90,488    |      |   | $ | 95,325    |     
|Loans with variable interest rates |                                         |   | 104,843                |      |            |   | 132,287   |      |         |   | 970,979   |      |   |   | 1,208,109 |     
|                                   |                                         |   |                        |      |            |   |           |      |         |   |           |      |   |   |           |     
|                                   |                                         | $ | 106,203                |      |            | $ | 135,764   |      |         | $ | 1,061,467 |      |   | $ | 1,303,434 |     
|                                   |                                         |   |                        |      |            |   |           |      |         |   |           |      |   |   |           |     
|                                   | Percentage with variable interest rates |   |                        | 98.7 | %          |   |           | 97.4 | %       |   |           | 91.5 | % |   |           | 92.7 | %
|                                   |                                         |   |                        |      |            |   |           |      |         |   |           |      |   |   |           |     

The table above should not be regarded as a forecast of future cash
collections because a substantial portion of real estate loans may be renewed
or repaid prior to contractual maturity and may have adjustable interest rates.



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The following table sets forth certain information regarding the real
property collateral securing our real estate loan portfolio as of December 31,
2001.

|                                 |                                |                             |                     |       |                        |       |           |         |        |           |         |      |                            |      |         |    |       |  |   |        |  |  |   |       |  |   |        |        |       |        | 
|-------------------------------- | ------------------------------ | --------------------------- | ------------------- | ----- | ---------------------- | ----- | --------- | ------- | ------ | --------- | ------- | ---- | -------------------------- | ---- | ------- | -- | ----- |  | - | ------ |  |  | - | ----- |  | - | ------ | ------ | ----- | ------ | 
|                                 |                                |                             |                     |       | Number                 |       |           |         |        |           | Percent |      | Range of Principal Balance |      | Non-   
|                                 |                                |                             |                     |       | of                     |       | Gross     |         | of     |           |         |      | Accrual                   
|                                 |                                |                             |                     |       | Loans                  |       | Amount    |         | Total  |           | Min     |      | Max                        |      | Average |    | Loans
|                                 |                                |                             |                     |       |                        |       |           |         |        |           |         |      |                            |      |         |    |      
|                                 |                                |                             |                     |       | (dollars in thousands)
|Income Producing Property Loans: |                                |                             |                     |       |                        |       |           |         |        |           |         |      |                            |      |         |    |       |  |   |        |  |  |   |       |  |   |        |       
|                                 | Multi-family (5 or more units) |                             |                     | 811   |                        |       | $         | 400,289 |        |           |         | 30.7 | %                          |      | $       | 43 |       |  | $ | 6,639  |  |  | $ | 550   |  |   | $      | 159    |      
|                                 | Retail                         |                             |                     | 340   |                        |       |           | 284,983 |        |           |         | 21.9 | %                          |      |         | 9  |       |  |   | 10,460 |  |  |   | 3,073 |  |   |        | 171    |      
|                                 | Office                         |                             |                     | 90    |                        |       |           | 147,008 |        |           |         | 11.3 | %                          |      |         | 14 |       |  |   | 10,600 |  |  |   | 1,633 |  |   |        |       |      
|                                 | Hotel                          |                             |                     | 51    |                        |       |           | 119,061 |        |           |         | 9.1  | %                          |      |         | 3  |       |  |   | 12,278 |  |  |   | 2,335 |  |   |        | 293    |      
|                                 | Industrial/warehouse           |                             |                     | 51    |                        |       |           | 31,714  |        |           |         | 2.4  | %                          |      |         | 8  |       |  |   | 3,200  |  |  |   | 622   |  |   |        | 205    |      
|                                 | Mixed-use                      |                             |                     | 63    |                        |       |           | 27,056  |        |           |         | 2.1  | %                          |      |         | 19 |       |  |   | 3,231  |  |  |   | 429   |  |   |        | 92     |      
|                                 | Mobile home parks              |                             |                     | 22    |                        |       |           | 12,239  |        |           |         | 0.9  | %                          |      |         | 85 |       |  |   | 1,738  |  |  |   | 556   |  |   |        |       |      
|                                 | Other                          |                             |                     | 119   |                        |       |           | 103,549 |        |           |         | 7.9  | %                          |      |         | 9  |       |  |   | 5,845  |  |  |   | 5,734 |  |   |        |       |      
|                                 |                                |                             |                     |       |                        |       |           |         |        |           |         |      |                            |      |         |    |       |  |   |        |  |  |   |       |  |   |        |       
|                                 |                                |                             | Total commercial    |       |                        | 1,547 |           |         |        | 1,125,899 |         |      |                            | 86.3 | %       |    |       |  |   |        |  |  |   |       |  |   |        |        |       | 920    | 
|                                 |                                |                             |                     |       |                        |       |           |         |        |           |         |      |                            |      |         |    |       |  |   |        |  |  |   |       |  |   |        |       
|Construction and Land:           |                                |                             |                     |       |                        |       |           |         |        |           |         |      |                            |      |         |    |       |  |   |        |  |  |   |       |  |   |        |       
|                                 | Construction                   |                             |                     | 26    |                        |       |           | 54,129  |        |           |         | 4.2  | %                          |      |         | 15 |       |  |   | 9,076  |  |  |   | 4,010 |  |   |        | 1,600  |      
|                                 | Land                           |                             |                     | 11    |                        |       |           | 7,728   |        |           |         | 0.6  | %                          |      |         | 38 |       |  |   | 3,452  |  |  |   | 1,466 |  |   |        |       |      
|                                 |                                |                             |                     |       |                        |       |           |         |        |           |         |      |                            |      |         |    |       |  |   |        |  |  |   |       |  |   |        |       
|                                 |                                | Total construction and land |                     |       | 37                     |       |           |         | 61,857 |           |         |      | 4.8                        | %    |         |    |       |  |   |        |  |  |   |       |  |   |        |        | 1,600 |       
|                                 |                                |                             |                     |       |                        |       |           |         |        |           |         |      |                            |      |         |    |       |  |   |        |  |  |   |       |  |   |        |       
|Single-family mortgages:         |                                |                             |                     |       |                        |       |           |         |        |           |         |      |                            |      |         |    |       |  |   |        |  |  |   |       |  |   |        |       
|                                 | Single-family (1-4 units)      |                             |                     | 1,017 |                        |       |           | 115,678 |        |           |         | 8.9  | %                          |      | $       | 4  |       |  | $ | 1,256  |  |  | $ | 348   |  |   |        | 12,770 |      
|                                 |                                |                             |                     |       |                        |       |           |         |        |           |         |      |                            |      |         |    |       |  |   |        |  |  |   |       |  |   |        |       
|                                 |                                |                             | Total single-family |       |                        | 1,017 |           |         |        | 115,678   |         |      |                            | 8.9  | %       |    |       |  |   |        |  |  |   |       |  |   |        |        |       | 12,770 | 
|                                 |                                |                             |                     |       |                        |       |           |         |        |           |         |      |                            |      |         |    |       |  |   |        |  |  |   |       |  |   |        |       
|                                 |                                |                             | 2,601               |       |                        | $     | 1,303,434 |         |        |           | 100.0   | %    |                            |      |         |    |       |  |   |        |  |  |   |       |  | $ | 15,290 |       
|                                 |                                |                             |                     |       |                        |       |           |         |        |           |         |      |                            |      |         |    |       |  |   |        |  |  |   |       |  |   |        |       



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The following table sets forth the location of the collateral for our loan
portfolios as of December 31, 2001.

|                     |                                        |                           |       |                        |       |        |           |         |         |         |       |      |      |  
|-------------------- | -------------------------------------- | ------------------------- | ----- | ---------------------- | ----- | ------ | --------- | ------- | ------- | ------- | ----- | ---- | ---- | -
|                     |                                        |                           |       | Number                 |       |        |           |         |         | Percent
|                     |                                        |                           |       | of                     |       | Gross  |           | of     
|                     |                                        |                           |       | Loans                  |       | Amount |           | Total  
|                     |                                        |                           |       |                        |       |        |           |        
|                     |                                        |                           |       | (dollars in thousands)
|Southern California: |                                        |                           |       |                        |       |        |           |         |         |         |       |     
|                     | Los Angeles County                     |                           |       | 596                    |       |        | $         | 350,028 |         |         |       | 27.0 | %   
|                     | San Diego County                       |                           |       | 58                     |       |        |           | 78,659  |         |         |       | 6.0  | %   
|                     | Riverside County                       |                           |       | 49                     |       |        |           | 52,449  |         |         |       | 4.0  | %   
|                     | San Bernardino County                  |                           |       | 58                     |       |        |           | 40,850  |         |         |       | 3.1  | %   
|                     | Orange County                          |                           |       | 52                     |       |        |           | 34,427  |         |         |       | 2.6  | %   
|                     | All Other Southern California Counties |                           |       | 259                    |       |        |           | 108,879 |         |         |       | 8.4  | %   
|                     |                                        |                           |       |                        |       |        |           |         |         |         |       |     
|                     |                                        | Total Southern California |       |                        | 1,072 |        |           |         | 665,292 |         |       |      | 51.1 | %
|                     |                                        |                           |       |                        |       |        |           |         |         |         |       |     
|Northern California: |                                        |                           |       |                        |       |        |           |         |         |         |       |     
|                     | San Francisco County                   |                           |       | 34                     |       |        |           | 58,519  |         |         |       | 4.5  | %   
|                     | Sacramento County                      |                           |       | 26                     |       |        |           | 14,582  |         |         |       | 1.1  | %   
|                     | Santa Clara County                     |                           |       | 29                     |       |        |           | 14,898  |         |         |       | 1.1  | %   
|                     | Alameda County                         |                           |       | 39                     |       |        |           | 17,405  |         |         |       | 1.3  | %   
|                     | Fresno County                          |                           |       | 39                     |       |        |           | 15,066  |         |         |       | 1.2  | %   
|                     | San Mateo                              |                           |       | 11                     |       |        |           | 13,955  |         |         |       | 1.1  | %   
|                     | All Other Northern California Counties |                           |       | 160                    |       |        |           | 88,853  |         |         |       | 6.8  | %   
|                     |                                        |                           |       |                        |       |        |           |         |         |         |       |     
|                     |                                        | Total Northern California |       |                        | 338   |        |           |         | 223,278 |         |       |      | 17.1 | %
|                     |                                        |                           |       |                        |       |        |           |         |         |         |       |     
|Outside California:  |                                        |                           |       |                        |       |        |           |         |         |         |       |     
|                     | Arizona                                |                           |       | 130                    |       |        |           | 61,203  |         |         |       | 4.7  | %   
|                     | Texas                                  |                           |       | 76                     |       |        |           | 49,177  |         |         |       | 3.8  | %   
|                     | Washington                             |                           |       | 90                     |       |        |           | 47,459  |         |         |       | 3.6  | %   
|                     | Nevada                                 |                           |       | 58                     |       |        |           | 39,535  |         |         |       | 3.0  | %   
|                     | Colorado                               |                           |       | 66                     |       |        |           | 28,762  |         |         |       | 2.2  | %   
|                     | Florida                                |                           |       | 88                     |       |        |           | 24,705  |         |         |       | 1.9  | %   
|                     | Missouri                               |                           |       | 19                     |       |        |           | 12,358  |         |         |       | 0.9  | %   
|                     | Utah                                   |                           |       | 47                     |       |        |           | 12,323  |         |         |       | 0.9  | %   
|                     | New York                               |                           |       | 52                     |       |        |           | 12,306  |         |         |       | 0.9  | %   
|                     | Michigan                               |                           |       | 51                     |       |        |           | 4,617   |         |         |       | 0.4  | %   
|                     | Other U.S. States                      |                           |       | 514                    |       |        |           | 122,419 |         |         |       | 9.5  | %   
|                     |                                        |                           |       |                        |       |        |           |         |         |         |       |     
|                     |                                        | Total Outside California  |       |                        | 1,191 |        |           |         | 414,864 |         |       |      | 31.8 | %
|                     |                                        |                           |       |                        |       |        |           |         |         |         |       |     
|                     |                                        |                           | 2,601 |                        |       | $      | 1,303,434 |         |         |         | 100.0 | %   
|                     |                                        |                           |       |                        |       |        |           |         |         |         |       |     



29



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Although we generally seek to limit risks associated with our portfolio of
real estate and construction loans by limiting the geographic concentration and
by varying the types of underlying collateral, significant concentration risks
still remain. Concentrations of loans in certain geographic regions, for
example, cause our risk associated with these loans to be closely associated
with the general economic and social environment of the region. Localized
economic and competitive conditions, natural disasters, possible terrorist
activities or social conditions all may affect the values of collateral located
within a particular geographic area. In addition, certain types of properties
may be more or less subject to changes in prevailing economic, competitive or
social conditions.

The following table sets forth certain information with respect to our
real estate loan originations and purchases and real estate loans held in
trust. Premiums paid and discounts taken on loans purchased in the secondary
market are not included below.

|                                                                                     |  |                                           |           |      |  |      |           |   |  |   |         |  
|------------------------------------------------------------------------------------ |  | ----------------------------------------- | --------- | ---- |  | ---- | --------- | - |  | - | ------- | -
|                                                                                     |  | As of and for the Years Ended December 31
|                                                                                     |  |                                          
|                                                                                     |  | 2001                                      |           | 2000 |  | 1999
|                                                                                     |  |                                           |           |      |  |     
|                                                                                     |  | (dollars in thousands)                   
|Gross real estate loans originated and
retained in the portfolio                     |  | $                                         | 285,650   |      |  | $    | 198,163   |   |  | $ | 293,781 |  
|Gross real estate loans originated on
behalf of third-party investors                |  |                                           | 9,018     |      |  |      | 15,300    |   |  |   | 9,089   |  
|Gross real estate loans purchased (1)                                                |  |                                           | 207,400   |      |  |      | 440,417   |   |  |   | 91,402  |  
|                                                                                     |  |                                           |           |      |  |      |           |   |  |   |         |  
|Total loan production                                                                |  | $                                         | 502,068   |      |  | $    | 653,880   |   |  | $ | 394,272 |  
|                                                                                     |  |                                           |           |      |  |      |           |   |  |   |         |  
|Gross real estate loans at end of period                                             |  | $                                         | 1,303,434 |      |  | $    | 1,276,106 |   |  | $ | 971,881 |  
|Gross real estate loans
weighted-average portfolio yield                             |  |                                           | 9.26      | %    |  |      | 10.62     | % |  |   | 10.30   | %
|Average size of real estate loans
originated and retained in the
Companys portfolio |  | $                                         | 1,120     |      |  | $    | 2,359     |   |  | $ | 2,260   |  



---

|(1) |  | Includes $250.5 million of real estate loans acquired through the ICCMAC
Trust acquisition in 2000.
|--- |  | ---------------------------------------------------------------------------------------------------



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Investment Securities

The following table shows the amortized cost and approximate fair value of
investment securities available for sale at the dates indicated.

|                                               |  |                |        |       |  |           |        |       |  |           |        |       |  |   |        |  |  |   |        |  |  |   |        | 
|---------------------------------------------- |  | -------------- | ------ | ----- |  | --------- | ------ | ----- |  | --------- | ------ | ----- |  | - | ------ |  |  | - | ------ |  |  | - | ------ | 
|                                               |  | December 31   
|                                               |  |               
|                                               |  | 2001           |        | 2000  |  | 1999     
|                                               |  |                |        |       |  |          
|                                               |  | Amortized      |        | Fair  |  | Amortized |        | Fair  |  | Amortized |        | Fair 
|                                               |  | Cost           |        | Value |  | Cost      |        | Value |  | Cost      |        | Value
|                                               |  |                |        |       |  |           |        |       |  |           |        |      
|                                               |  | (in thousands)
|U.S. Government Agency                         |  | $              | 29,409 |       |  | $         | 29,404 |       |  | $         | 46,196 |       |  | $ | 46,319 |  |  | $ | 43,260 |  |  | $ | 43,012 | 
|Equity securities                              |  |                | 14     |       |  |           | 7      |       |  |           | 22     |       |  |   | 6      |  |  |   | 14,786 |  |  |   | 16,235 | 
|                                               |  |                |        |       |  |           |        |       |  |           |        |       |  |   |        |  |  |   |        |  |  |   |        | 
|Total investment securities
available for sale |  | $              | 29,423 |       |  | $         | 29,411 |       |  | $         | 46,218 |       |  | $ | 46,325 |  |  | $ | 58,046 |  |  | $ | 59,247 | 
|                                               |  |                |        |       |  |           |        |       |  |           |        |       |  |   |        |  |  |   |        |  |  |   |        | 

Liquidity and Deposit Accounts

Liquidity refers to our ability to maintain cash flow adequate to fund
operations and meet obligations and other commitments on a timely basis,
including the payment of maturing deposits and the origination or purchase of
new real estate loans. We maintain a cash and investment securities portfolio
designed to satisfy operating and regulatory liquidity requirements while
preserving capital and maximizing yield. As of December 31, 2001 and 2000, the
Banks liquidity ratios were 17.0% and 11.7%, respectively,
exceeding the DFI
regulatory requirement of 1.5%. In addition, our liquidity position is
supported by a credit facility with the FHLB of San
Francisco. As of December 31, 2001, we had remaining available borrowing
capacity under this credit facility of $87.5 million, net of the $4.6 million
of additional FHLB Stock that we would be required to
purchase to support those additional borrowings, and $30.0 million of unused
federal funds credit facilities under established lines of credit with two
banks.

Total deposit accounts decreased approximately $62.0 million to $953.7
million at December 31, 2001 from $1.0 billion at December 31, 2000. The
decrease in deposits in 2001 was primarily due to depositors moving their
investments to liquid or short term accounts during the declining market rate
environment. Total deposit accounts increased $102.1 million to $1.0 billion at
December 31, 2000 from $913.6 million at December 31, 1999. In both 2001 and
2000, the funds provided from deposits were used to fund the growth in our
loan portfolio. We retained 72% and 80% of the funds from maturing time
certificates through rollover of certificates in 2001 and 2000, respectively.
Although we compete for deposits primarily on the basis of rates, based on our
historical experience regarding retention of deposits, management believes that
a significant portion of deposits will remain with us upon maturity on an
ongoing basis.

The following table sets forth information regarding deposits outstanding
at the dates indicated.

|                                    |  |                |         |      |  |      |           |  |  |   |         | 
|----------------------------------- |  | -------------- | ------- | ---- |  | ---- | --------- |  |  | - | ------- | 
|                                    |  | December 31   
|                                    |  |               
|                                    |  | 2001           |         | 2000 |  | 1999
|                                    |  |                |         |      |  |     
|                                    |  | (in thousands)
|Money market and passbook accounts  |  | $              | 158,188 |      |  | $    | 102,868   |  |  | $ | 126,529 | 
|Time certificates under $100,000    |  |                | 526,911 |      |  |      | 572,851   |  |  |   | 522,227 | 
|Time certificates $100,000 and over |  |                | 268,555 |      |  |      | 339,980   |  |  |   | 264,857 | 
|                                    |  |                |         |      |  |      |           |  |  |   |         | 
|                                    |  | $              | 953,654 |      |  | $    | 1,015,699 |  |  | $ | 913,613 | 
|                                    |  |                |         |      |  |      |           |  |  |   |         | 



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Capital Resources

As of December 31, 2001, the Banks leverage, tier 1 risk-based and total
risk-based capital ratios were 10.1%, 10.7% and 12.0%, respectively. These
ratios were 9.1%, 10.4% and 11.6% as of December 31, 2000, respectively. The
minimum regulatory requirements for leverage, tier 1 risk-based and total
risk-based capital ratios are 4.0%, 4.0% and 8.0%, respectively. The well
capitalized regulatory requirements for leverage, tier 1 risk-based and total
risk-based capital ratios are 5.0%, 6.0% and 10.0%, respectively. As of
December 31, 2001, the Banks capital position was designated as well
capitalized for regulatory purposes.

Our shareholders equity increased $4.4 million to $137.9 million at
December 31, 2001 compared to $133.6 million at December 31, 2000, due
primarily to the accumulation of $18.2 million in net income as retained
earnings. This increase was partially offset by a $14.7 million reduction due
to the repurchase of shares of our common stock currently held as treasury
stock and a $98,000 decrease due to the change in accumulated other
comprehensive income. There were no dividends declared or paid by us during
2001.

Credit Risk Elements

Allowance for Loan Losses and Nonperforming Assets

The following table provides certain information with respect to our total
allowance for loan losses, including charge-offs, recoveries and selected
ratios, for the periods indicated.

|                             |                                              |                           |                                                                       |                    |                              |                                           |                        |        |       |           |        |        |       |         |        |        |       |         |        |     |       |         |        |        |  
|---------------------------- | -------------------------------------------- | ------------------------- | --------------------------------------------------------------------- | ------------------ | ---------------------------- | ----------------------------------------- | ---------------------- | ------ | ----- | --------- | ------ | ------ | ----- | ------- | ------ | ------ | ----- | ------- | ------ | --- | ----- | ------- | ------ | ------ | -
|                             |                                              |                           |                                                                       |                    |                              | As of and for the Years Ended December 31
|                             |                                              |                           |                                                                       |                    |                              |                                          
|                             |                                              |                           |                                                                       |                    |                              |                                           | 2001                   |        | 2000  |           | 1999   |        | 1998  |         | 1997  
|                             |                                              |                           |                                                                       |                    |                              |                                           |                        |        |       |           |        |        |       |         |       
|                             |                                              |                           |                                                                       |                    |                              |                                           | (dollars in thousands)
|Balance at beginning of year |                                              | $                         | 27,186                                                                |                    |                              | $                                         | 19,895                 |        |       | $         | 16,811 |        |       | $       | 12,178 |        |       | $       | 10,885 |    
|                             |                                              | Provision for loan losses |                                                                       |                    | 4,575                        |                                           |                        |        | 4,775 |           |        |        | 4,950 |         |        |        | 4,550 |         |        |     | 3,300 |        
|                             | Addition due to purchase of the ICCMAC Trust |                           |                                                                       | -                 |                              |                                           |                        | 4,614  |       |           |        |       |       |         |        |       |       |         |        |    |      
|                             |                                              | Charge-offs:              |                                                                       |                    |                              |                                           |                        |        |       |           |        |        |       |         |        |        |       |         |        |     |       |        
|                             |                                              |                           |                                                                       | Real estate loans  |                              |                                           | (2,845                 | )      |       |           | (1,489 | )      |       |         | (2,088 | )      |       |         | (64    | )   |       |         | (2,108 | )     
|                             |                                              |                           |                                                                       | Construction loans |                              |                                           | (2,419                 | )      |       |           | (1,000 | )      |       |         |       |        |       |         |       |     |       |         | (16    | )     
|                             |                                              |                           |                                                                       |                    |                              |                                           |                        |        |       |           |        |        |       |         |        |        |       |         |        |     |      
|                             |                                              |                           |                                                                       |                    | Total charge-offs            |                                           |                        | (5,264 | )     |           |        | (2,489 | )     |         |        | (2,088 | )     |         |        | (64 | )     |         |        | (2,124 | )
|                             |                                              |                           |                                                                       |                    |                              |                                           |                        |        |       |           |        |        |       |         |        |        |       |         |        |     |      
|                             |                                              | Recoveries:               |                                                                       |                    |                              |                                           |                        |        |       |           |        |        |       |         |        |        |       |         |        |     |       |        
|                             |                                              |                           |                                                                       | Real estate loans  |                              |                                           | 153                    |        |       |           | 391    |        |       |         | 222    |        |       |         | 147    |     |       |         | 116    |       
|                             |                                              |                           |                                                                       | Other loans        |                              |                                           | -                     |        |       |           | -     |        |       |         | -     |        |       |         | -     |     |       |         | 1      |       
|                             |                                              |                           |                                                                       |                    |                              |                                           |                        |        |       |           |        |        |       |         |        |        |       |         |        |     |      
|                             |                                              |                           |                                                                       |                    | Total recoveries             |                                           |                        | 153    |       |           |        | 391    |       |         |        | 222    |       |         |        | 147 |       |         |        | 117    |  
|                             |                                              |                           |                                                                       |                    |                              |                                           |                        |        |       |           |        |        |       |         |        |        |       |         |        |     |      
|                             |                                              |                           |                                                                       |                    | Net (charge-offs) recoveries |                                           |                        | (5,111 | )     |           |        | (2,098 | )     |         |        | (1,866 | )     |         |        | 83  |       |         |        | (2,007 | )
|                             |                                              |                           |                                                                       |                    |                              |                                           |                        |        |       |           |        |        |       |         |        |        |       |         |        |    
|Balance at end of the year   |                                              | $                         | 26,650                                                                |                    |                              | $                                         | 27,186                 |        |       | $         | 19,895 |        |       | $       | 16,811 |        |       | $       | 12,178 |    
|                             |                                              |                           |                                                                       |                    |                              |                                           |                        |        |       |           |        |        |       |         |        |        |       |         |        |     |      
|                             |                                              |                           | Average real estate loans outstanding during the year                 |                    | $                            | 1,295,097                                 |                        |        | $     | 1,147,602 |        |        | $     | 925,059 |        |        | $     | 811,847 |        |     | $     | 708,447 |       
|                             |                                              |                           | Real estate loans, net, at end of the year (1)                        |                    | $                            | 1,311,178                                 |                        |        | $     | 1,284,835 |        |        | $     | 971,375 |        |        | $     | 878,900 |        |     | $     | 763,031 |       
|Selected Ratios:             |                                              |                           |                                                                       |                    |                              |                                           |                        |        |       |           |        |        |       |         |        |        |       |         |        |    
|                             |                                              |                           | Net (charge-offs) recoveries to average real estate
loans outstanding |                    |                              | (0.39                                     | %)                     |        |       | (0.18     | %)     |        |       | (0.20   | %)     |        |       | 0.01    | %      |     |       | (0.28   | %)    
|                             |                                              |                           | Net (charge-offs) recoveries to real estate loans, net
(1)            |                    |                              | (0.39                                     | %)                     |        |       | (0.16     | %)     |        |       | (0.19   | %)     |        |       | 0.01    | %      |     |       | (0.26   | %)    
|                             |                                              |                           | Allowance for loan losses to real estate loans, net (1)               |                    |                              | 2.16                                      | %                      |        |       | 2.12      | %      |        |       | 2.05    | %      |        |       | 1.91    | %      |     |       | 1.60    | %     
|                             |                                              |                           | Allowance for loan losses to nonaccrual loans                         |                    |                              | 174.30                                    | %                      |        |       | 149.85    | %      |        |       | 249.40  | %      |        |       | 309.37  | %      |     |       | 146.16  | %     



---

|(1) |  | Real estate loans, before allowance for loan losses and net of premium,
deferred loan origination costs and deferred loan fees.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------

The allowance for loan losses decreased to $26.7 million or 2.03% of our
total real estate loan portfolio, at December 31, 2001 from $27.2 million or
2.12% of our total real estate loan portfolio, at December 31, 2000. The
decrease in the allowance was due primarily to higher net charge-offs of $5.1
million for the year ended December



32



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31, 2001 as compared to $2.1 million for the
prior year and a
lower provision for loan losses of $4.6 million for the year ended December
31, 2001 as compared to $4.8 million for the year ended December 31, 2000. The
factors affecting the lower provision for loan losses in 2001 were as follows:
(1) lower nonperforming loans of $15.3 million at December 31, 2001 as compared
to $18.1 million at December 31, 2000 (2) the decrease in loan delinquencies to
$32.9 million at December 31, 2001 as compared to $44.1 million at December 31,
2000 and (3) the reallocation of $2.7 million of allowance for loan losses from
the Imperial Capital REIT to the Bank, as actual loan losses related to real
estate loans held in trust have been negligible.

The allowance for loan losses increased to $27.2 million or 2.12% of our
total real estate loan portfolio, at December 31, 2000 from $19.9 million or
2.05% of our total real estate loan portfolio, at December 31, 1999. The
increase in the allowance was due primarily to (1) the allowance for loan
losses of $4.6 million recorded upon the purchase of the ICCMAC Trust and (2)
provisions for loan losses recorded in 2000 totaling $4.8 million. These
increases in the allowance for loan losses were partially offset by net
charge-offs which totaled $2.1 million in 2000 compared to $1.9 million in
1999.

The following table sets forth managements historical allocation of the
allowance for loan losses by loan or contract category and the percentage of
gross loans in each category to total gross loans at the dates indicated.

|                       |  |             |        |       |  |           |     |       |  |           |        |       |  |           |     |       |  |           |        |       |  |  |     |   |  |   |        |  |  |  |     |   |  |   |        |  |  |  |     |  
|---------------------- |  | ----------- | ------ | ----- |  | --------- | --- | ----- |  | --------- | ------ | ----- |  | --------- | --- | ----- |  | --------- | ------ | ----- |  |  | --- | - |  | - | ------ |  |  |  | --- | - |  | - | ------ |  |  |  | --- | -
|                       |  | December 31
|                       |  |            
|                       |  | 2001        |        | 2000  |  | 1999      |     | 1998  |  | 1997     
|                       |  |             |        |       |  |           |     |       |  |          
|                       |  | Allowance   |        | % of  |  | Allowance |     | % of  |  | Allowance |        | % of  |  | Allowance |     | % of  |  | Allowance |        | % of 
|                       |  | For loan    |        | loans |  | For loan  |     | loans |  | For loan  |        | loans |  | For loan  |     | loans |  | For loan  |        | loans
|Loan Category:         |  | losses      |        | (1)   |  | losses    |     | (1)   |  | losses    |        | (1)   |  | losses    |     | (1)   |  | losses    |        | (1)  
|                       |  |             |        |       |  |           |     |       |  |           |        |       |  |           |     |       |  |           |        |      
|Secured by real estate |  | $           | 26,650 |       |  |           | 100 | %     |  | $         | 27,186 |       |  |           | 100 | %     |  | $         | 19,895 |       |  |  | 100 | % |  | $ | 16,811 |  |  |  | 100 | % |  | $ | 12,178 |  |  |  | 100 | %
|                       |  |             |        |       |  |           |     |       |  |           |        |       |  |           |     |       |  |           |        |       |  |  |     |   |  |   |        |  |  |  |     |   |  |   |        |  |  |  |     |  
|Total                  |  | $           | 26,650 |       |  |           | 100 | %     |  | $         | 27,186 |       |  |           | 100 | %     |  | $         | 19,895 |       |  |  | 100 | % |  | $ | 16,811 |  |  |  | 100 | % |  | $ | 12,178 |  |  |  | 100 | %
|                       |  |             |        |       |  |           |     |       |  |           |        |       |  |           |     |       |  |           |        |       |  |  |     |   |  |   |        |  |  |  |     |   |  |   |        |  |  |  |     |  



---

|(1) |  | Percentage represents the percent of gross loans in category to total
gross loans.
|--- |  | ----------------------------------------------------------------------------------

Management periodically assesses the adequacy of the allowance for loan
losses by reference to many factors that may be weighted differently at various
times depending on prevailing conditions. These factors include, among other
elements:



| |  |  | general portfolio trends relative to asset and portfolio size;                                               
| | - |  | -------------------------------------------------------------------------------------------------------------
|
| |  |  | asset categories;                                                                                            
|
| |  |  | potential credit and geographic concentrations;                                                              
|
| |  |  | delinquency trends and nonaccrual loan levels;                                                               
|
| |  |  | historical loss experience and risks associated
with changes in economic, social and business conditions; and
|
| |  |  | The underwriting standards in effect when the
loan was made.                                                 

Accordingly, the calculation of the adequacy of the allowance for loan
losses is not based solely on the level of nonperforming assets. Management
believes that our allowance for loan losses as of December 31, 2001 was
adequate to absorb the known and inherent risks of loss in the loan portfolio
at that date. While management believes the estimates and assumptions used in
its determination of the adequacy of the allowance are reasonable, there can be
no assurance that such estimates and assumptions will not be proven incorrect
in the future, or that the actual amount of future provisions will not exceed
the amount of past provisions or that any increased provisions that may be
required will not adversely impact our financial condition and results of
operations. In addition, the determination of the amount of the Banks
allowance for loan losses is subject to review by bank regulators, as part of
the routine examination process, which may result in the establishment of
additional reserves based upon their judgment of information available to them
at the time of their examination.



33



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##### Table of Contents



The following table sets forth the delinquency status of our loan
portfolios at each of the dates indicated.

|                      |                        |  |                        |        |           |  |         |      |           |  |        |        |           |  |  |      |   |  |         |        |  |  |  |      |  
|--------------------- | ---------------------- |  | ---------------------- | ------ | --------- |  | ------- | ---- | --------- |  | ------ | ------ | --------- |  |  | ---- | - |  | ------- | ------ |  |  |  | ---- | -
|                      |                        |  | December 31           
|                      |                        |  |                       
|                      |                        |  | 2001                   |        | 2000      |  | 1999   
|                      |                        |  |                        |        |           |  |        
|                      |                        |  |                        |        |           |  | Percent |      |           |  |        |        | Percent   |  |  |      |   |  | Percent
|                      |                        |  |                        |        |           |  | of      |      |           |  |        |        | of        |  |  |      |   |  | of     
|                      |                        |  |                        |        |           |  | Gross   |      |           |  |        |        | Gross     |  |  |      |   |  | Gross  
|                      |                        |  | Amount                 |        | Portfolio |  | Amount  |      | Portfolio |  | Amount |        | Portfolio
|                      |                        |  |                        |        |           |  |         |      |           |  |        |        |          
|                      |                        |  | (dollars in thousands)
|Period of Delinquency |                        |  |                        |        |           |  |         |      |           |  |        |        |           |  |  |      |   |  |         |        |  |  |  |     
|                      | 30  59 days           |  | $                      | 11,481 |           |  |         | 0.88 | %         |  | $      | 12,245 |           |  |  | 0.96 | % |  | $       | 7,147  |  |  |  | 0.73 | %
|                      | 60  89 days           |  |                        | 7,954  |           |  |         | 0.61 | %         |  |        | 15,640 |           |  |  | 1.23 | % |  |         | 988    |  |  |  | 0.10 | %
|                      | 90 days or more        |  |                        | 13,450 |           |  |         | 1.03 | %         |  |        | 16,226 |           |  |  | 1.27 | % |  |         | 7,614  |  |  |  | 0.78 | %
|                      |                        |  |                        |        |           |  |         |      |           |  |        |        |           |  |  |      |   |  |         |        |  |  |  |     
|                      | Total loans delinquent |  | $                      | 32,885 |           |  |         | 2.52 | %         |  | $      | 44,111 |           |  |  | 3.46 | % |  | $       | 15,749 |  |  |  | 1.61 | %
|                      |                        |  |                        |        |           |  |         |      |           |  |        |        |           |  |  |      |   |  |         |        |  |  |  |     

Our loan delinquencies decreased to $32.9 million or 2.52% of our gross
loan portfolio at December 31, 2001 as compared to $44.1 million or 3.46% and
$15.7 million or 1.61% at December 31, 2000 and 1999, respectively. The
decrease in total delinquent real estate loans in 2001 was due primarily to an
$18.8 million decrease in past due commercial real estate loans; a $511,000
decrease of past due loans held in the ICCMAC Trust partially offset by an $8.0
million increase in past due one-four family real estate loans.

The Company has established a policy that all real estate loans greater
than $1.5 million are reviewed annually. This review usually involves
obtaining updated information about the collateral propertys leasing status
and cash flow from operations. In addition, independent outside consultants
periodically review the Banks real estate loan portfolio and report findings
to management and the audit committee of the board of directors. Loans
considered to warrant special attention are presented to the review and reserve
committee, which meets at least monthly to review the status of classified
loans, consider new classifications or declassifications, determine the need
for and amount of any charge offs, and recommend to our executive committee of
the board of directors the level of allowance for loan losses to be maintained.
If management believes that the collection of the full amount of principal is
unlikely and the value of the collateral securing the obligation is
insufficient, steps are generally taken to protect and liquidate the
collateral. Losses resulting from the difference between the loan balance and
the fair market value of the collateral are recognized by a partial charge-off
of the loan balance to the collaterals fair market value. While real property
collateral is held for sale, it is subject to periodic evaluation and/or
appraisal. If an evaluation or appraisal indicates that the property will
ultimately sell for less than our recorded value, the loss is recognized by a
charge to allowance for loan losses on other real estate owned.

Loans are placed on nonaccrual status when they become 90 days or more
contractually delinquent, or earlier if the collection of interest is
considered by management to be doubtful, unless the loan is considered well
secured and in the process of collection. Subsequent cash collections on
nonaccrual loans are either recognized as interest income on a cash basis, if
the loan is well secured and in managements judgment the net book value is
fully collectible, or recorded entirely as a reduction of principal.



34



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##### Table of Contents



The following table sets forth our nonperforming assets by category and
troubled debt restructurings as of the dates indicated:

|                                                                      |                 |                                                                               |        |                        |        |      |        |       |        |      |        |       |        |   |        |       |       |   |        |       |        | 
|--------------------------------------------------------------------- | --------------- | ----------------------------------------------------------------------------- | ------ | ---------------------- | ------ | ---- | ------ | ----- | ------ | ---- | ------ | ----- | ------ | - | ------ | ----- | ----- | - | ------ | ----- | ------ | 
|                                                                      |                 |                                                                               |        | December 31           
|                                                                      |                 |                                                                               |        |                       
|                                                                      |                 |                                                                               |        | 2001                   |        | 2000 |        | 1999  |        | 1998 |        | 1997 
|                                                                      |                 |                                                                               |        |                        |        |      |        |       |        |      |        |      
|                                                                      |                 |                                                                               |        | (dollars in thousands)
|Nonaccrual loans:(1)                                                  |                 |                                                                               |        |                        |        |      |        |       |        |      |        |       |        |   |        |       |       |   |        |      
|                                                                      | Real Estate (2) |                                                                               | $      | 13,690                 |        |      | $      | 9,430 |        |      | $      | 7,977 |        |   | $      | 5,434 |       |   | $      | 8,332 |       
|                                                                      | Construction    |                                                                               |        | 1,600                  |        |      |        | 8,712 |        |      |        | -    |        |   |        | -    |       |   |        | -    |       
|Other real estate owned, net                                          |                 |                                                                               | 13,741 |                        |        |      | 2,250  |       |        |      | 1,041  |       |        |   | 1,201  |       |       |   | 3,946  |      
|                                                                      |                 |                                                                               |        |                        |        |      |        |       |        |      |        |       |        |   |        |       |       |   |        |      
|                                                                      |                 | Total nonperforming assets                                                    |        |                        | 29,031 |      |        |       | 20,392 |      |        |       | 9,018  |   |        |       | 6,635 |   |        |       | 12,278 | 
|                                                                      |                 | Accruing loans past-due 90
days or more with respect to
principal or interest |        |                        | -     |      |        |       | 9,765  |      |        |       | -     |   |        |       | -    |   |        |       | -     | 
|                                                                      |                 | Performing troubled debt
restructurings                                       |        |                        | 3,752  |      |        |       | 3,002  |      |        |       | 13,996 |   |        |       | 805   |   |        |       | 1,574  | 
|                                                                      |                 |                                                                               |        |                        |        |      |        |       |        |      |        |       |        |   |        |       |       |   |        |      
|                                                                      |                 | $                                                                             | 32,783 |                        |        | $    | 33,159 |       |        | $    | 23,014 |       |        | $ | 7,440  |       |       | $ | 13,852 |      
|                                                                      |                 |                                                                               |        |                        |        |      |        |       |        |      |        |       |        |   |        |       |       |   |        |      
|Non accrual loans to total gross
loans and real estate loans in
trust |                 |                                                                               | 1.17   | %                      |        |      | 1.42   | %     |        |      | 0.82   | %     |        |   | 0.62   | %     |       |   | 1.09   | %    
|Allowance
for loan losses to
nonaccrual loans                         |                 |                                                                               | 174.30 | %                      |        |      | 149.85 | %     |        |      | 249.40 | %     |        |   | 309.37 | %     |       |   | 146.16 | %    
|Nonperforming assets to total assets                                  |                 |                                                                               | 1.92   | %                      |        |      | 1.44   | %     |        |      | 0.81   | %     |        |   | 0.64   | %     |       |   | 1.21   | %    



---

|(1) |  | Gross interest income that would have been recorded on nonaccrual loans
had they been current in accordance with original terms was $2.1 million
for the year ended December 31, 2001. The amount of interest income on
such nonaccrual loans included in net income for the year ended December
31, 2001 was $340,000.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Includes one loan with a net book balance of $1.4 million that is a
nonperforming troubled debt restructuring in 2000.                                                                                                                                                                                                 

Our nonaccrual real estate loans totaled $15.3 million at December 31,
2001. One of these loans had an outstanding balance greater than $1.0 million.

In 2001, $17.0 million of new other real estate owned was acquired, $5.6
million of other real estate owned was sold, and $405,000 of write-downs were
taken, resulting in net other real estate owned at December 31, 2001 of $13.7
million. Other real estate owned at December 31, 2001 consisted of seventeen
properties with an average balance of approximately $782,000. The other real
estate owned property with the largest net book balance totaled $5.0 million.

In addition to the above, management has concerns as to the borrowers
ability to comply with present repayment terms on $21.5 million
of other loans of concern as of December 31, 2001.






|Item 7.A. | Quantitative and Qualitative Disclosures About Market Risk
|--------- | ----------------------------------------------------------

We realize income principally from the differential or spread between the
interest earned on loans, investments and other interest-earning assets and the
interest paid on deposits and borrowings. Loan volumes and yields, as well as
the volume of and rates on investments, deposits and borrowings, are affected
by market interest rates. Additionally, because of the terms and conditions of
many of our loan agreements and deposit accounts, a change in interest rates
could also affect the duration of the loan portfolio and/or the deposit base,
which could alter our sensitivity to future changes in interest rates.

Interest rate risk management focuses on maintaining consistent growth in
net interest income within board-approved policy limits while taking into
consideration, among other factors, our overall credit, operating income,
operating cost and capital profile. The asset/liability management committee,
which includes senior management representatives and reports to the Board of
Directors, monitors and manages interest rate risk to maintain an acceptable
level of change in net interest income as a result of changes in interest
rates. See Item 1. Business  Nonperforming
Assets and Other Loans of Concern.



35



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##### Table of Contents



In evaluating our exposure to changes in interest rates, certain risks
inherent in the method of analysis presented in the following table must be
considered. For example, although certain assets and liabilities may have
similar maturities or periods to repricing, they may react in different degrees
and at different times to changes in market rates. Additionally, loan
prepayments and early withdrawals of time certificates could cause interest
sensitivities to vary from those that appear in the following table. Further,
certain assets, such as variable rate real estate loans, have features that
restrict changes in interest rates on a short-term basis and over the life of
the asset. The majority of our variable rate real estate loans may not adjust
downward below their initial rate, with increases generally limited to maximum
adjustments of 2% per year and up to 4% over the life of the loan. These loans
may also be subject to prepayment penalties. At December 31, 2001, 92.8% of
our variable rate loan portfolio would not adjust downward below the initial
interest rate with the weighted-average minimum interest rate on this portfolio
being 8.97% and 93.2% of the total loans outstanding had a lifetime interest
rate cap, with the weighted-average lifetime interest rate cap on this
portfolio being 12.37%. The anticipated effects of these various factors are
considered by management in implementing interest rate risk management
activities.

We use an internal earnings simulation model as a tool to identify and
manage our interest rate risk profile. The model is based on projected cash
flows and repricing characteristics for all financial instruments and
incorporates market-based assumptions regarding the impact of changing interest
rates on current volumes of applicable financial instruments, considering
applicable interest rate floors and caps and prepayment penalties associated
with each financial instrument. These assumptions are inherently uncertain
and, as a result, the model cannot precisely measure net interest income or
precisely predict the impact of changes in interest rates on net interest
income. Actual results will differ from simulated results due to timing,
magnitude and frequency of interest rate changes as well as changes in market
conditions and management strategies.

The following table shows our estimated earnings sensitivity profile as of
December 31, 2001:

|                    |  |                      |      |  
|------------------- |  | -------------------- | ---- | -
|Changes in          |  | Percentage Change in
|Interest rates      |  | Net Interest Income 
|(Basis Points)      |  | (12 Months)         
|                    |  |                     
|+ 200 Over One Year |  |                      | -6.3 | %
|+ 100 Over One Year |  |                      | -4.2 | %
|- 100 Over One Year |  |                      | +3.7 | %
|- 200 Over One Year |  |                      | +7.6 | %

Another tool used to identify and manage our interest rate risk profile is the
static gap analysis. Interest sensitivity gap analysis measures the difference
between the assets and liabilities repricing or maturing within specific time
periods. Although our cumulative GAP position indicates an asset-sensitive
position, our loan portfolio has reached floor interest rates in excess of
current market rates to such an extent that a 200 basis point increase in rates
does not cause our assets to reprice. Our liabilities within the cumulative GAP
period reprice upward to market rates under this scenario causing compression of
net interest income. In a declining rate environment, our liabilities will
continue to reprice downward, while our loan portfolio remains at its floor
rates, creating an increase in net interest income.



36



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##### Table of Contents



The following table presents an estimate of our static GAP analysis as of
December 31, 2001.

|                                                                                             |                                            |   |                          |           |            |   |          |         |          |   |           |         |       |   |         |         |  |   |          |         |  |   |           |           | 
|-------------------------------------------------------------------------------------------- | ------------------------------------------ | - | ------------------------ | --------- | ---------- | - | -------- | ------- | -------- | - | --------- | ------- | ----- | - | ------- | ------- |  | - | -------- | ------- |  | - | --------- | --------- | 
|                                                                                             |                                            |   | Maturing or Repricing in
|                                                                                             |                                            |   |                         
|                                                                                             |                                            |   |                          |           |            |   | After 3  |         | After 1  |   |           |         |       |   |         |         |  |   |          |         | 
|                                                                                             |                                            |   |                          |           |            |   | Months   |         | Year But |   |           |         |       |   | Non-    |         |  |   |         
|                                                                                             |                                            |   | 3 months or              |           | But Within |   | Within   |         | After    |   | Interest  |         |       |   |        
|                                                                                             |                                            |   | less                     |           | 1 year     |   | 5 Years  |         | 5 Years  |   | Sensitive |         | Total
|                                                                                             |                                            |   |                          |           |            |   |          |         |          |   |           |         |      
|Assets                                                                                       |                                            |   |                          |           |            |   |          |         |          |   |           |         |       |   |         |         |  |   |          |         |  |   |           |          
|Real estate loans (1)                                                                        |                                            | $ | 1,030,109                |           |            | $ | 61,681   |         |          | $ | 37,031    |         |       | $ | 15,894  |         |  | $ |         |         |  | $ | 1,144,715 |          
|Real estate loans held in trust (2)                                                          |                                            |   | 41,584                   |           |            |   | 48,386   |         |          |   | 3,052     |         |       |   | 65,697  |         |  |   |         |         |  |   | 158,719   |          
|Cash and cash equivalents                                                                    |                                            |   | 134,232                  |           |            |   |         |         |          |   |          |         |       |   |        |         |  |   | 9        |         |  |   | 134,241   |          
|Investment securities available
for sale                                                     |                                            |   |                         |           |            |   |         |         |          |   | 9,500     |         |       |   | 19,900  |         |  |   | 11       |         |  |   | 29,411    |          
|Noninterest-earning assets less
allowance for loan losses and
unearned fees                  |                                            |   |                         |           |            |   |         |         |          |   |          |         |       |   |        |         |  |   | 41,222   |         |  |   | 41,222    |          
|                                                                                             |                                            |   |                          |           |            |   |          |         |          |   |           |         |       |   |         |         |  |   |          |         |  |   |           |          
|                                                                                             | Total assets                               |   | $                        | 1,205,925 |            |   | $        | 110,067 |          |   | $         | 49,583  |       |   | $       | 101,491 |  |   | $        | 41,242  |  |   | $         | 1,508,308 | 
|                                                                                             |                                            |   |                          |           |            |   |          |         |          |   |           |         |       |   |         |         |  |   |          |         |  |   |           |          
|Liabilities and Shareholders
Equity                                                         |                                            |   |                          |           |            |   |          |         |          |   |           |         |       |   |         |         |  |   |          |         |  |   |           |          
|Time certificates under $100,000                                                             |                                            | $ | 169,926                  |           |            | $ | 286,836  |         |          | $ | 70,149    |         |       | $ |        |         |  | $ |         |         |  | $ | 526,911   |          
|Time certificates $100,000 and more                                                          |                                            |   | 96,373                   |           |            |   | 144,670  |         |          |   | 27,512    |         |       |   |        |         |  |   |         |         |  |   | 268,555   |          
|Money market and passbook accounts                                                           |                                            |   | 158,188                  |           |            |   |         |         |          |   |          |         |       |   |        |         |  |   |         |         |  |   | 158,188   |          
|FHLB advances                                                                                |                                            |   | 172,800                  |           |            |   | 54,500   |         |          |   | 27,455    |         |       |   | 14,530  |         |  |   |         |         |  |   | 269,285   |          
|Collateralized mortgage obligations                                                          |                                            |   | 109,648                  |           |            |   |         |         |          |   |          |         |       |   |        |         |  |   |         |         |  |   | 109,648   |          
|Other liabilities                                                                            |                                            |   | -                       |           |            |   |         |         |          |   |          |         |       |   |        |         |  |   | 37,792   |         |  |   | 37,792    |          
|Shareholders equity                                                                         |                                            |   | -                       |           |            |   |         |         |          |   |          |         |       |   |        |         |  |   | 137,929  |         |  |   | 137,929   |          
|                                                                                             |                                            |   |                          |           |            |   |          |         |          |   |           |         |       |   |         |         |  |   |          |         |  |   |           |          
|                                                                                             | Total liabilities and
shareholders equity |   | $                        | 706,935   |            |   | $        | 486,006 |          |   | $         | 125,116 |       |   | $       | 14,530  |  |   | $        | 175,721 |  |   | $         | 1,508,308 | 
|                                                                                             |                                            |   |                          |           |            |   |          |         |          |   |           |         |       |   |         |         |  |   |          |         |  |   |           |          
|Net repricing assets over (under)
repricing liabilities equals
interest rate sensitivity GAP |                                            | $ | 498,990                  |           |            | $ | (375,939 | )       |          | $ | (75,533   | )       |       | $ | 86,961  |         |  | $ | (134,479 | )       |  |   |           |          
|                                                                                             |                                            |   |                          |           |            |   |          |         |          |   |           |         |       |   |         |         |  |   |          |         |  |   |           |          
|Cumulative interest rate
sensitivity GAP                                                     |                                            | $ | 498,990                  |           |            | $ | 123,051  |         |          | $ | 47,518    |         |       | $ | 134,479 |         |  | $ |         |         |  |   |           |          
|                                                                                             |                                            |   |                          |           |            |   |          |         |          |   |           |         |       |   |         |         |  |   |          |         |  |   |           |          
|Cumulative GAP as a percentage of
total assets                                               |                                            |   | 33.1                     | %         |            |   | 8.2      | %       |          |   | 3.2       | %       |       |   | 8.9     | %       |  |   | 0.0      | %       |  |   |           |          
|                                                                                             |                                            |   |                          |           |            |   |          |         |          |   |           |         |       |   |         |         |  |   |          |         |  |   |           |          



---

|(1) |  | Variable rate loans consist principally of real estate secured loans with
a maximum term of 30 years. Approximately 65% of these loans are
generally adjustable quarterly based on changes in various indexes,
subject generally to a maximum increase of 2% annually and up to 4% over
the life of the loan. Approximately 17% of these loans are fixed for an
initial period of two to five years from origination, and then are
adjustable quarterly based on changes in various indexes. Nonaccrual
loans of approximately $15.0 million are assumed to reprice after five
years.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Nonaccrual loans of approximately $329,000 are assumed to reprice after
five years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  



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Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                                                                                |  |      |    | 
|--------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                |  | Page
|                                                                                                                |  |     
|Report of Independent Public Accountants                                                                        |  |      | 39 | 
|Consolidated Balance Sheets as of December 31, 2001 and 2000                                                    |  |      | 40 | 
|Consolidated Statements of Income for the Years Ended
December 31, 2001, 2000 and 1999                          |  |      | 41 | 
|Consolidated Statements of Changes in Shareholders Equity for the
Years Ended December 31, 2001, 2000 and 1999 |  |      | 42 | 
|Consolidated Statements of Cash Flows for the Years Ended
December 31, 2001, 2000 and 1999                      |  |      | 43 | 
|Notes to Consolidated Financial Statements                                                                      |  |      | 44 | 



38



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##### Table of Contents



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and the Board of Directors of
     ITLA Capital Corporation:

We have audited the accompanying consolidated balance sheets of ITLA Capital
Corporation and subsidiaries (the Company), a Delaware corporation, as of
December 31, 2001 and 2000, and the related consolidated statements of income,
changes in shareholders equity and cash flows for each of the three years in
the period ended December 31, 2001. These financial statements are the
responsibility of the Companys management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ITLA Capital Corporation and
subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted
in the United States.




/s/ Arthur Andersen LLP
 
Los Angeles, California
January 25, 2002



39



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##### Table of Contents



ITLA CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

|                                                                                                                                                      |                                                                                                                                                                 |                            |                                            |         |                                     |           |           |           |         |           | 
|----------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | ------- | ----------------------------------- | --------- | --------- | --------- | ------- | --------- | 
|                                                                                                                                                      |                                                                                                                                                                 |                            |                                            |         | December 31                        
|                                                                                                                                                      |                                                                                                                                                                 |                            |                                            |         |                                    
|                                                                                                                                                      |                                                                                                                                                                 |                            |                                            |         | 2001                                |           | 2000     
|                                                                                                                                                      |                                                                                                                                                                 |                            |                                            |         |                                     |           |          
|                                                                                                                                                      |                                                                                                                                                                 |                            |                                            |         | (in thousands except share amounts)
|Assets                                                                                                                                                |                                                                                                                                                                 |                            |                                            |         |                                     |           |           |          
|Cash and cash equivalents                                                                                                                             |                                                                                                                                                                 | $                          | 134,241                                    |         |                                     | $         | 70,950    |          
|Investment securities available for sale, at fair value                                                                                               |                                                                                                                                                                 |                            | 29,411                                     |         |                                     |           | 46,325    |          
|Stock in Federal Home Loan Bank                                                                                                                       |                                                                                                                                                                 |                            | 13,464                                     |         |                                     |           | 3,963     |          
|Real estate loans, net (net of allowance for loan losses of
$24,722 and $22,608 in 2001 and 2000, respectively)                                       |                                                                                                                                                                 |                            | 1,122,370                                  |         |                                     |           | 1,045,927 |          
|Real estate loans held in trust, net (net of allowance for loan
losses of $1,928 in 2001and $4,578 in 2000, respectively)                             |                                                                                                                                                                 |                            | 162,158                                    |         |                                     |           | 211,722   |          
|Interest receivable                                                                                                                                   |                                                                                                                                                                 |                            | 11,144                                     |         |                                     |           | 11,821    |          
|Other real estate owned, net                                                                                                                          |                                                                                                                                                                 |                            | 13,741                                     |         |                                     |           | 2,250     |          
|Premises and equipment, net                                                                                                                           |                                                                                                                                                                 |                            | 2,177                                      |         |                                     |           | 2,690     |          
|Deferred income taxes                                                                                                                                 |                                                                                                                                                                 |                            | 11,869                                     |         |                                     |           | 11,302    |          
|Other assets                                                                                                                                          |                                                                                                                                                                 |                            | 7,733                                      |         |                                     |           | 8,193     |          
|                                                                                                                                                      |                                                                                                                                                                 |                            |                                            |         |                                     |           |           |          
|                                                                                                                                                      |                                                                                                                                                                 |                            | Total assets                               |         | $                                   | 1,508,308 |           |           | $       | 1,415,143 | 
|                                                                                                                                                      |                                                                                                                                                                 |                            |                                            |         |                                     |           |           |          
|Liabilities and Shareholders Equity                                                                                                                  |                                                                                                                                                                 |                            |                                            |         |                                     |           |           |          
|Liabilities:                                                                                                                                          |                                                                                                                                                                 |                            |                                            |         |                                     |           |           |          
|                                                                                                                                                      | Deposit accounts                                                                                                                                                |                            | $                                          | 953,654 |                                     |           | $         | 1,015,699 |        
|                                                                                                                                                      | Collateralized mortgage obligations                                                                                                                             |                            |                                            | 109,648 |                                     |           |           | 161,852   |        
|                                                                                                                                                      | Federal Home Loan Bank advances                                                                                                                                 |                            |                                            | 269,285 |                                     |           |           | 79,250    |        
|                                                                                                                                                      | Accounts payable and other liabilities                                                                                                                          |                            |                                            | 9,674   |                                     |           |           | 11,269    |        
|                                                                                                                                                      |                                                                                                                                                                 |                            |                                            |         |                                     |           |           |          
|                                                                                                                                                      |                                                                                                                                                                 |                            | Total liabilities                          |         |                                     | 1,342,261 |           |           |         | 1,268,070 | 
|                                                                                                                                                      |                                                                                                                                                                 |                            |                                            |         |                                     |           |           |          
|Commitments
and contingencies (note 15)
Guaranteed preferred beneficial interests in the Companys
junior subordinated deferrable interest debentures |                                                                                                                                                                 |                            | 28,118                                     |         |                                     |           | 13,519    |          
|Shareholders equity:                                                                                                                                 |                                                                                                                                                                 |                            |                                            |         |                                     |           |           |          
|                                                                                                                                                      | Preferred stock, 5,000,000 shares authorized, none issued                                                                                                       |                            |                                            |        |                                     |           |           |          |        
|                                                                                                                                                      | Contributed capital  common stock, $.01 par value;
20,000,000 shares authorized, 8,212,749 and 8,206,749 issued
and outstanding in 2001 and 2000, respectively |                            |                                            | 58,183  |                                     |           |           | 57,120    |        
|                                                                                                                                                      | Retained earnings                                                                                                                                               |                            |                                            | 115,768 |                                     |           |           | 97,617    |        
|                                                                                                                                                      | Accumulated other comprehensive (loss) income                                                                                                                   |                            |                                            | (7      | )                                   |           |           | 91        |        
|                                                                                                                                                      |                                                                                                                                                                 |                            |                                            |         |                                     |           |           |          
|                                                                                                                                                      |                                                                                                                                                                 |                            | 173,944                                    |         |                                     |           | 154,828   |          
|                                                                                                                                                      | Less treasury stock, at cost - 2,354,056 and 1,546,336
shares in 2001 and 2000, respectively                                                                    |                            |                                            | (36,015 | )                                   |           |           | (21,274   | )      
|                                                                                                                                                      |                                                                                                                                                                 |                            |                                            |         |                                     |           |           |          
|                                                                                                                                                      |                                                                                                                                                                 | Total shareholders equity |                                            |         | 137,929                             |           |           |           | 133,554 |          
|                                                                                                                                                      |                                                                                                                                                                 |                            |                                            |         |                                     |           |           |          
|                                                                                                                                                      |                                                                                                                                                                 |                            | Total liabilities and shareholders equity |         | $                                   | 1,508,308 |           |           | $       | 1,415,143 | 
|                                                                                                                                                      |                                                                                                                                                                 |                            |                                            |         |                                     |           |           |          

See accompanying notes to the consolidated financial statements.



40



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##### Table of Contents



ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF INCOME

|                                                                                       |                                                     |                                            |                                                       |                            |         |                                         |        |         |         |        |        |        |         |        |        | 
|-------------------------------------------------------------------------------------- | --------------------------------------------------- | ------------------------------------------ | ----------------------------------------------------- | -------------------------- | ------- | --------------------------------------- | ------ | ------- | ------- | ------ | ------ | ------ | ------- | ------ | ------ | 
|                                                                                       |                                                     |                                            |                                                       |                            |         | Years Ended December 31                
|                                                                                       |                                                     |                                            |                                                       |                            |         |                                        
|                                                                                       |                                                     |                                            |                                                       |                            |         | 2001                                    |        | 2000    |         | 1999  
|                                                                                       |                                                     |                                            |                                                       |                            |         |                                         |        |         |         |       
|                                                                                       |                                                     |                                            |                                                       |                            |         | (in thousands except per share amounts)
|Interest income:                                                                       |                                                     |                                            |                                                       |                            |         |                                         |        |         |         |        |        |       
|                                                                                       | Real estate loans, including fees                   |                                            | $                                                     | 104,949                    |         |                                         | $      | 102,419 |         |        | $      | 95,303 |        
|                                                                                       | Real estate loans held in trust                     |                                            |                                                       | 14,954                     |         |                                         |        | 16,192  |         |        |        |       |        
|                                                                                       | Cash and investment securities                      |                                            |                                                       | 3,192                      |         |                                         |        | 5,164   |         |        |        | 5,910  |        
|                                                                                       |                                                     |                                            |                                                       |                            |         |                                         |        |         |         |        |        |       
|                                                                                       |                                                     | Total interest income                      |                                                       |                            | 123,095 |                                         |        |         | 123,775 |        |        |        | 101,213 |       
|                                                                                       |                                                     |                                            |                                                       |                            |         |                                         |        |         |         |        |        |       
|Interest expense:                                                                      |                                                     |                                            |                                                       |                            |         |                                         |        |         |         |        |        |       
|                                                                                       | Deposit accounts                                    |                                            |                                                       | 52,864                     |         |                                         |        | 55,968  |         |        |        | 46,452 |        
|                                                                                       | Collateralized mortgage obligations                 |                                            |                                                       | 6,209                      |         |                                         |        | 10,901  |         |        |        |       |        
|                                                                                       | Federal Home Loan Bank advances                     |                                            |                                                       | 4,790                      |         |                                         |        | 1,773   |         |        |        | 2,008  |        
|                                                                                       |                                                     |                                            |                                                       |                            |         |                                         |        |         |         |        |        |       
|                                                                                       |                                                     | Total interest expense                     |                                                       |                            | 63,863  |                                         |        |         | 68,642  |        |        |        | 48,460  |       
|                                                                                       |                                                     |                                            |                                                       |                            |         |                                         |        |         |         |        |        |       
|                                                                                       |                                                     |                                            | Net interest income before provisions for loan
losses |                            |         | 59,232                                  |        |         |         | 55,133 |        |        |         | 52,753 |       
|Provision for loan losses                                                              |                                                     |                                            | 4,575                                                 |                            |         |                                         | 4,775  |         |         |        | 4,950  |       
|                                                                                       |                                                     |                                            | Net interest income after provisions for loan losses  |                            |         | 54,657                                  |        |         |         | 50,358 |        |        |         | 47,803 |       
|                                                                                       |                                                     |                                            |                                                       |                            |         |                                         |        |         |         |        |        |       
|Non-interest income:                                                                   |                                                     |                                            |                                                       |                            |         |                                         |        |         |         |        |        |       
|                                                                                       | Fee income from mortgage banking activities         |                                            |                                                       | 83                         |         |                                         |        | 47      |         |        |        | 73     |        
|                                                                                       | Gain on sale of investment securities               |                                            |                                                       |                           |         |                                         |        | 1,412   |         |        |        |       |        
|                                                                                       | Other                                               |                                            |                                                       | 976                        |         |                                         |        | 872     |         |        |        | 828    |        
|                                                                                       |                                                     |                                            |                                                       |                            |         |                                         |        |         |         |        |        |       
|                                                                                       |                                                     | Total non-interest income                  |                                                       |                            | 1,059   |                                         |        |         | 2,331   |        |        |        | 901     |       
|                                                                                       |                                                     |                                            |                                                       |                            |         |                                         |        |         |         |        |        |       
|Non-interest expense:                                                                  |                                                     |                                            |                                                       |                            |         |                                         |        |         |         |        |        |       
|                                                                                       | Compensation and benefits                           |                                            |                                                       | 11,778                     |         |                                         |        | 9,958   |         |        |        | 9,739  |        
|                                                                                       | Occupancy and equipment                             |                                            |                                                       | 2,968                      |         |                                         |        | 2,567   |         |        |        | 2,788  |        
|                                                                                       | FDIC assessment                                     |                                            |                                                       | 182                        |         |                                         |        | 188     |         |        |        | 99     |        
|                                                                                       | Other                                               |                                            |                                                       | 7,890                      |         |                                         |        | 7,941   |         |        |        | 8,131  |        
|                                                                                       |                                                     |                                            |                                                       |                            |         |                                         |        |         |         |        |        |       
|                                                                                       |                                                     | Total recurring general and administrative |                                                       |                            | 22,818  |                                         |        |         | 20,654  |        |        |        | 20,757  |       
|                                                                                       | Non-recurring expense                               |                                            |                                                       |                           |         |                                         |        | 1,400   |         |        |        |       |        
|                                                                                       |                                                     |                                            |                                                       |                            |         |                                         |        |         |         |        |        |       
|                                                                                       |                                                     | Total general and administrative           |                                                       |                            | 22,818  |                                         |        |         | 22,054  |        |        |        | 20,757  |       
|                                                                                       |                                                     |                                            |                                                       |                            |         |                                         |        |         |         |        |        |       
|                                                                                       | Real estate owned expense (income), net             |                                            |                                                       | 136                        |         |                                         |        | (31     | )       |        |        | 72     |        
|                                                                                       | Provision for losses on other real estate owned     |                                            |                                                       | 269                        |         |                                         |        | 167     |         |        |        | 195    |        
|                                                                                       | (Gain) loss on sale of other real estate owned, net |                                            |                                                       | (18                        | )       |                                         |        | 2       |         |        |        | 205    |        
|                                                                                       |                                                     |                                            |                                                       |                            |         |                                         |        |         |         |        |        |       
|                                                                                       |                                                     | Total real estate owned expense, net       |                                                       |                            | 387     |                                         |        |         | 138     |        |        |        | 472     |       
|                                                                                       |                                                     |                                            |                                                       |                            |         |                                         |        |         |         |        |        |       
|                                                                                       |                                                     |                                            |                                                       | Total non-interest expense |         |                                         | 23,205 |         |         |        | 22,192 |        |         |        | 21,229 | 
|                                                                                       |                                                     |                                            |                                                       |                            |         |                                         |        |         |         |        |        |       
|Income before provision for income taxes and minority interest
in income of subsidiary |                                                     |                                            | 32,511                                                |                            |         |                                         | 30,497 |         |         |        | 27,475 |       
|Minority interest in income of subsidiary                                              |                                                     |                                            | 2,967                                                 |                            |         |                                         | 478    |         |         |        |       |       
|                                                                                       |                                                     |                                            |                                                       |                            |         |                                         |        |         |         |        |        |       
|Income before provision for income taxes                                               |                                                     |                                            | 29,544                                                |                            |         |                                         | 30,019 |         |         |        | 27,475 |       
|Provision for income taxes                                                             |                                                     |                                            | 11,393                                                |                            |         |                                         | 11,880 |         |         |        | 11,270 |       
|                                                                                       |                                                     |                                            |                                                       |                            |         |                                         |        |         |         |        |        |       
|                                                                                       | NET INCOME                                          |                                            | $                                                     | 18,151                     |         |                                         | $      | 18,139  |         |        | $      | 16,205 |        
|                                                                                       |                                                     |                                            |                                                       |                            |         |                                         |        |         |         |        |        |       
|                                                                                       | BASIC EARNINGS PER SHARE                            |                                            | $                                                     | 2.82                       |         |                                         | $      | 2.57    |         |        | $      | 2.26   |        
|                                                                                       |                                                     |                                            |                                                       |                            |         |                                         |        |         |         |        |        |       
|                                                                                       | DILUTED EARNINGS PER SHARE                          |                                            | $                                                     | 2.72                       |         |                                         | $      | 2.51    |         |        | $      | 2.21   |        
|                                                                                       |                                                     |                                            |                                                       |                            |         |                                         |        |         |         |        |        |       

See accompanying notes to the consolidated financial statements



41



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##### Table of Contents



ITLA CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY



|                                                                                                      |                                                                                                                             |  |                                     |   |                      |  |              |       |         |  |              |       |             |   |                     |   |  |   |       |     |  |   |        |     |  |   |         |   | 
|----------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------- | - | -------------------- |  | ------------ | ----- | ------- |  | ------------ | ----- | ----------- | - | ------------------- | - |  | - | ----- | --- |  | - | ------ | --- |  | - | ------- | - | 
|                                                                                                      |                                                                                                                             |  |                                     |   |                      |  | Common Stock |       |         |  |              |       |             |   |                     |   |  |   |       |     |  |   |        |     |  |   |        
|                                                                                                      |                                                                                                                             |  |                                     |   |                      |  |              |       |         |  |              |       |             |   |                     |   |  |   |       |     |  |   |        |     |  |   |        
|                                                                                                      |                                                                                                                             |  | Number of shares                    |   | Shareholders' Equity
|                                                                                                      |                                                                                                                             |  |                                     |   |                     
|                                                                                                      |                                                                                                                             |  |                                     |   |                      |  |              |       |         |  |              |       |             |   | Contributed Capital
|                                                                                                      |                                                                                                                             |  |                                     |   |                      |  |              |       |         |  |              |       |             |   |                    
|                                                                                                      |                                                                                                                             |  | Gross                               |   |                      |  |              |       | Net     |  |              |       |             |   |                     |   |  |   |       |     |  |   |        |     | 
|                                                                                                      |                                                                                                                             |  | Shares                              |   |                      |  |              |       | Shares  |  |              |       |             |   |                     |   |  |   | Total |     |  |   |       
|                                                                                                      |                                                                                                                             |  | Issued and                          |   | Treasury             |  | Issued and   |       | Share   |  | Earned       |       | Contributed |   | Retained           
|                                                                                                      |                                                                                                                             |  | Outstanding                         |   | Shares               |  | Outstanding  |       | Capital |  | Compensation |       | Capital     |   | Earnings           
|                                                                                                      |                                                                                                                             |  |                                     |   |                      |  |              |       |         |  |              |       |             |   |                    
|                                                                                                      |                                                                                                                             |  | (in thousands except share amounts)
|Balance at January 1, 1999                                                                            |                                                                                                                             |  | 8,151,916                           |   |                      |  | (985,432     | )     |         |  | 7,166,484    |       |             |   | 55,917              |   |  |   |      |     |  |   | 55,917 |     |  |   | 63,273  |  
|Issuance of common stock -
employee stock options                                                     |                                                                                                                             |  | 51,000                              |   |                      |  |             |       |         |  | 51,000       |       |             |   | 542                 |   |  |   |      |     |  |   | 542    |     |  |   |        |  
|Earned compensation from
Supplemental Executive
Retirement Plan /Recognition
and Retention Plan, net  |                                                                                                                             |  |                                    |   |                      |  |             |       |         |  |             |       |             |   |                    |   |  |   | 725   |     |  |   | 725    |     |  |   |        |  
|Common stock repurchased                                                                              |                                                                                                                             |  |                                     |   |                      |  | (36,000      | )     |         |  | (36,000      | )     |             |   |                    |   |  |   |      |     |  |   |       |     |  |   |        |  
|Net income                                                                                            |                                                                                                                             |  |                                    |   |                      |  |             |       |         |  |             |       |             |   |                    |   |  |   |      |     |  |   |       |     |  |   | 16,205  |  
|Total comprehensive income                                                                            |                                                                                                                             |  |                                    |   |                      |  |             |       |         |  |             |       |             |   |                    |   |  |   |      |     |  |   |       |     |  |   |        |  
|                                                                                                      |                                                                                                                             |  |                                     |   |                      |  |              |       |         |  |              |       |             |   |                     |   |  |   |       |     |  |   |        |     |  |   |         |  
|Balance at December 31, 1999                                                                          |                                                                                                                             |  | 8,202,916                           |   |                      |  | (1,021,432   | )     |         |  | 7,181,484    |       |             |   | 56,459              |   |  |   | 725   |     |  |   | 57,184 |     |  |   | 79,478  |  
|                                                                                                      |                                                                                                                             |  |                                     |   |                      |  |              |       |         |  |              |       |             |   |                     |   |  |   |       |     |  |   |        |     |  |   |         |  
|Issuance of common stock-
employee stock options                                                      |                                                                                                                             |  | 3,833                               |   |                      |  |             |       |         |  | 3,833        |       |             |   | 36                  |   |  |   |      |     |  |   | 36     |     |  |   |        |  
|Earned compensation from
Supplemental Executive
Retirement Plan / Recognition and Retention Plan, net |                                                                                                                             |  |                                    |   |                      |  | 11,115       |       |         |  | 11,115       |       |             |   |                    |   |  |   | (100  | )   |  |   | (100   | )   |  |   |        |  
|Common stock repurchased                                                                              |                                                                                                                             |  |                                    |   |                      |  | (536,019     | )     |         |  | (536,019     | )     |             |   |                    |   |  |   |      |     |  |   |       |     |  |   |        |  
|Net income                                                                                            |                                                                                                                             |  |                                    |   |                      |  |             |       |         |  |             |       |             |   |                    |   |  |   |      |     |  |   |       |     |  |   | 18,139  |  
|Total comprehensive income                                                                            |                                                                                                                             |  |                                    |   |                      |  |             |       |         |  |             |       |             |   |                    |   |  |   |      |     |  |   |       |     |  |   |        |  
|                                                                                                      |                                                                                                                             |  |                                     |   |                      |  |              |       |         |  |              |       |             |   |                     |   |  |   |       |     |  |   |        |     |  |   |         |  
|Balance at December 31, 2000                                                                          |                                                                                                                             |  | 8,206,749                           |   |                      |  | (1,546,336   | )     |         |  | 6,660,413    |       |             |   | 56,495              |   |  |   | 625   |     |  |   | 57,120 |     |  |   | 97,617  |  
|                                                                                                      |                                                                                                                             |  |                                     |   |                      |  |              |       |         |  |              |       |             |   |                     |   |  |   |       |     |  |   |        |     |  |   |         |  
|Issuance of common stock-                                                                             |                                                                                                                             |  | 6,000                               |   |                      |  |             |       |         |  | 6,000        |       |             |   | 74                  |   |  |   |      |     |  |   | 74     |     |  |   |        |  
|                                                                                                      | employee stock options
Earned compensation from
Supplemental Executive
Retirement Plan / Recognition
and RetentionPlan, net |  |                                     |  |                      |  |              | 1,980 |         |  |              | 1,980 |             |   |                     |  |  |   |       | 989 |  |   |        | 989 |  |   |         |  | 
|Common stock repurchased                                                                              |                                                                                                                             |  |                                    |   |                      |  | (809,700     | )     |         |  | (809,700     | )     |             |   |                    |   |  |   |      |     |  |   |       |     |  |   |        |  
|Net income                                                                                            |                                                                                                                             |  |                                    |   |                      |  |             |       |         |  |             |       |             |   |                    |   |  |   |      |     |  |   |       |     |  |   | 18,151  |  
|Total comprehensive income                                                                            |                                                                                                                             |  |                                    |   |                      |  |             |       |         |  |             |       |             |   |                    |   |  |   |      |     |  |   |       |     |  |   |        |  
|                                                                                                      |                                                                                                                             |  |                                     |   |                      |  |              |       |         |  |              |       |             |   |                     |   |  |   |       |     |  |   |        |     |  |   |         |  
|Balance at December 31, 2001                                                                          |                                                                                                                             |  | 8,212,749                           |   |                      |  | (2,354,056   | )     |         |  | 5,858,693    |       |             | $ | 56,569              |   |  | $ | 1,614 |     |  | $ | 58,183 |     |  | $ | 115,768 |  
|                                                                                                      |                                                                                                                             |  |                                     |   |                      |  |              |       |         |  |              |       |             |   |                     |   |  |   |       |     |  |   |        |     |  |   |         |  

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                                                                      |                                                                                                                              |   |                                     |   |                      |   |         |    |        |   |            |       |                    |   |               |  |               |   |            |   |  |   |                     |   |  |   |        |  | 
|----------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------- | - | ----------------------------------- | - | -------------------- | - | ------- | -- | ------ | - | ---------- | ----- | ------------------ | - | ------------- |  | ------------- | - | ---------- | - |  | - | ------------------- | - |  | - | ------ |  | 
|                                                                                                      |                                                                                                                              |   | Shareholders' Equity                |   | Comprehensive Income
|                                                                                                      |                                                                                                                              |   |                                     |   |                     
|                                                                                                      |                                                                                                                              |   |                                     |   |                      |   |         |    |        |   |            |       |                    |   |               |  |               |   |            |   |  |   | Reclassification of |   |  |   |       
|                                                                                                      |                                                                                                                              |   |                                     |   |                      |   |         |    |        |   |            |       |                    |   |               |  |               |   |            |   |  |   | realized gains      |   |  |   |       
|                                                                                                      |                                                                                                                              |   | Accumulated                         |   |                      |   |         |    |        |   |            |       |                    |   |               |  | Unrealized    |   | previously |   |  |   |                    
|                                                                                                      |                                                                                                                              |   | Other                               |   | Treasury             |   |         |    |        |   |            |       |                    |   | Gain (loss)   |  | recognized in |   | Total     
|                                                                                                      |                                                                                                                              |   | Comprehensive                       |   | Stock,               |   |         |    |        |   | Net        |       | on securities,     |   | comprehensive |  | Comprehensive
|                                                                                                      |                                                                                                                              |   | Income (loss)                       |   | At Cost              |   | Total   |    | Income |   | net of tax |       | income, net of tax |   | Income       
|                                                                                                      |                                                                                                                              |   |                                     |   |                      |   |         |    |        |   |            |       |                    |   |              
|                                                                                                      |                                                                                                                              |   | (in thousands except share amounts)
|Balance at January 1, 1999                                                                            |                                                                                                                              |   | (150                                | ) |                      |   | (13,158 | )  |        |   | 105,882    |       |                    |   |               |  |               |   |            |   |  |   |                     |   |  |   |        | 
|Issuance of common stock -
employee stock options                                                     |                                                                                                                              |   |                                    |   |                      |   |        |    |        |   | 542        |       |                    |   |               |  |               |   |            |   |  |   |                     |   |  |   |        | 
|Earned compensation from
Supplemental Executive
Retirement Plan /Recognition
and Retention Plan       |                                                                                                                              |   |                                    |   |                      |   |        |    |        |   | 725        |       |                    |   |               |  |               |   |            |   |  |   |                     |   |  |   |        | 
|Common stock repurchased                                                                              |                                                                                                                              |   |                                    |   |                      |   | (515    | )  |        |   | (515       | )     |                    |   |               |  |               |   |            |   |  |   |                     |   |  |   |        | 
|Net income                                                                                            |                                                                                                                              |   |                                    |   |                      |   |        |    |        |   | 16,205     |       |                    |   |               |  |               |   |            |   |  |   |                     |   |  |   |        | 
|Total comprehensive income                                                                            |                                                                                                                              |   | 856                                 |   |                      |   |        |    |        |   | 856        |       |                    | $ | 16,205        |  |               | $ | 856        |   |  | $ |                    |   |  | $ | 17,061 | 
|                                                                                                      |                                                                                                                              |   |                                     |   |                      |   |         |    |        |   |            |       |                    |   |               |  |               |   |            |   |  |   |                     |   |  |   |        | 
|Balance at December 31, 1999                                                                          |                                                                                                                              |   | 706                                 |   |                      |   | (13,673 | )  |        |   | 123,695    |       |                    |   |               |  |               |   |            |   |  |   |                     |   |  |   |        | 
|                                                                                                      |                                                                                                                              |   |                                     |   |                      |   |         |    |        |   |            |       |                    |   |               |  |               |   |            |   |  |   |                     |   |  |   |        | 
|Issuance of common stock-
employee stock options                                                      |                                                                                                                              |   |                                    |   |                      |   |        |    |        |   | 36         |       |                    |   |               |  |               |   |            |   |  |   |                     |   |  |   |        | 
|Earned compensation from
Supplemental Executive
Retirement Plan / Recognition
and Retention Plan, net |                                                                                                                              |   |                                    |   |                      |   | 100     |    |        |   |           |       |                    |   |               |  |               |   |            |   |  |   |                     |   |  |   |        | 
|Common stock repurchased                                                                              |                                                                                                                              |   |                                    |   |                      |   | (7,701  | )  |        |   | (7,701     | )     |                    |   |               |  |               |   |            |   |  |   |                     |   |  |   |        | 
|Net income                                                                                            |                                                                                                                              |   |                                    |   |                      |   |        |    |        |   | 18,139     |       |                    |   |               |  |               |   |            |   |  |   |                     |   |  |   |        | 
|Total comprehensive income                                                                            |                                                                                                                              |   | (615                                | ) |                      |   |        |    |        |   | (615       | )     |                    | $ | 18,139        |  |               | $ | 232        |   |  | $ | (847                | ) |  | $ | 17,524 | 
|                                                                                                      |                                                                                                                              |   |                                     |   |                      |   |         |    |        |   |            |       |                    |   |               |  |               |   |            |   |  |   |                     |   |  |   |        | 
|Balance at December 31, 2000                                                                          |                                                                                                                              |   | 91                                  |   |                      |   | (21,274 | )  |        |   | 133,554    |       |                    |   |               |  |               |   |            |   |  |   |                     |   |  |   |        | 
|                                                                                                      |                                                                                                                              |   |                                     |   |                      |   |         |    |        |   |            |       |                    |   |               |  |               |   |            |   |  |   |                     |   |  |   |        | 
|Issuance of common stock-                                                                             |                                                                                                                              |   |                                    |   |                      |   |        |    |        |   | 74         |       |                    |   |               |  |               |   |            |   |  |   |                     |   |  |   |        | 
|                                                                                                      | employee stock options
Earned compensation from
Supplemental Executive
Retirement Plan / Recognition
and Retention Plan, net |   |                                     |  |                      |   |         | 18 |        |   |            | 1,007 |                    |   |               |  |               |   |            |   |  |   |                     |   |  |   |        |  | 
|Common stock repurchased                                                                              |                                                                                                                              |   |                                    |   |                      |   | (14,759 | )  |        |   | (14,759    | )     |                    |   |               |  |               |   |            |   |  |   |                     |   |  |   |        | 
|Net income                                                                                            |                                                                                                                              |   |                                    |   |                      |   |        |    |        |   | 18,151     |       |                    |   |               |  |               |   |            |   |  |   |                     |   |  |   |        | 
|Total comprehensive income                                                                            |                                                                                                                              |   | (98                                 | ) |                      |   |        |    |        |   | (98        | )     |                    | $ | 18,151        |  |               | $ | (98        | ) |  | $ |                    |   |  | $ | 18,053 | 
|                                                                                                      |                                                                                                                              |   |                                     |   |                      |   |         |    |        |   |            |       |                    |   |               |  |               |   |            |   |  |   |                     |   |  |   |        | 
|Balance at December 31, 2001                                                                          |                                                                                                                              | $ | (7                                  | ) |                      | $ | (36,015 | )  |        | $ | 137,929    |       |                    |   |               |  |               |   |            |   |  |   |                     |   |  |   |        | 
|                                                                                                      |                                                                                                                              |   |                                     |   |                      |   |         |    |        |   |            |       |                    |   |               |  |               |   |            |   |  |   |                     |   |  |   |        | 

See accompanying notes to the consolidated financial statements



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##### Table of Contents



ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                      |                                                                                   |                                                                                  |                                           |                                                      |          |                         |         |        |          |         |        |        |         |          |         |  
|------------------------------------- | --------------------------------------------------------------------------------- | -------------------------------------------------------------------------------- | ----------------------------------------- | ---------------------------------------------------- | -------- | ----------------------- | ------- | ------ | -------- | ------- | ------ | ------ | ------- | -------- | ------- | -
|                                      |                                                                                   |                                                                                  |                                           |                                                      |          | Years Ended December 31
|                                      |                                                                                   |                                                                                  |                                           |                                                      |          |                        
|                                      |                                                                                   |                                                                                  |                                           |                                                      |          | 2001                    |         | 2000   |          | 1999   
|                                      |                                                                                   |                                                                                  |                                           |                                                      |          |                         |         |        |          |        
|                                      |                                                                                   |                                                                                  |                                           |                                                      |          | (in thousands)         
|Cash Flows From Operating Activities: |                                                                                   |                                                                                  |                                           |                                                      |          |                         |         |        |          |         |        |       
|                                      | Net Income                                                                        |                                                                                  | $                                         | 18,151                                               |          |                         | $       | 18,139 |          |         | $      | 16,205 |        
|                                      | Adjustments to reconcile net income to net cash provided by operating activities: |                                                                                  |                                           |                                                      |          |                         |         |        |          |         |        |        |        
|                                      |                                                                                   | Depreciation and amortization of premises and equipment                          |                                           |                                                      | 836      |                         |         |        | 796      |         |        |        | 987     |         
|                                      |                                                                                   | Amortization of premium on purchased loans                                       |                                           |                                                      | 3,143    |                         |         |        | 2,755    |         |        |        | 391     |         
|                                      |                                                                                   | Amortization of original issue discount and deferred debt issuance cost on
CMOs |                                           |                                                      | 294      |                         |         |        | 874      |         |        |        |        |         
|                                      |                                                                                   | Amortization of deferred loan origination fees, net of costs                     |                                           |                                                      | (1,333   | )                       |         |        | (1,745   | )       |        |        | (2,513  | )       
|                                      |                                                                                   | Provision for loan losses                                                        |                                           |                                                      | 4,575    |                         |         |        | 4,775    |         |        |        | 4,950   |         
|                                      |                                                                                   | Provision for losses on other real estate owned                                  |                                           |                                                      | 269      |                         |         |        | 167      |         |        |        | 195     |         
|                                      |                                                                                   | Gain on sale of investment securities available for sale                         |                                           |                                                      |         |                         |         |        | (1,412   | )       |        |        |        |         
|                                      |                                                                                   | (Gain) loss on sales of other real estate owned                                  |                                           |                                                      | (18      | )                       |         |        | 2        |         |        |        | 205     |         
|                                      |                                                                                   | Decrease (increase) in interest receivable                                       |                                           |                                                      | 677      |                         |         |        | (2,466   | )       |        |        | (1,062  | )       
|                                      |                                                                                   | Deferred income tax benefit                                                      |                                           |                                                      | (546     | )                       |         |        | (1,321   | )       |        |        | (3,851  | )       
|                                      |                                                                                   | Decrease (increase) in other assets                                              |                                           |                                                      | 462      |                         |         |        | (115     | )       |        |        | (361    | )       
|                                      |                                                                                   | (Decrease) increase in accounts payable and other liabilities                    |                                           |                                                      | (654     | )                       |         |        | (346     | )       |        |        | 132     |         
|                                      |                                                                                   |                                                                                  |                                           |                                                      |          |                         |         |        |          |         |        |       
|                                      |                                                                                   |                                                                                  | Net cash provided by operating activities |                                                      |          | 25,856                  |         |        |          | 20,103  |        |        |         | 15,278   |        
|                                      |                                                                                   |                                                                                  |                                           |                                                      |          |                         |         |        |          |         |        |       
|Cash Flows From Investing Activities: |                                                                                   |                                                                                  |                                           |                                                      |          |                         |         |        |          |         |        |       
|                                      |                                                                                   | Purchases of investment securities available for sale                            |                                           |                                                      | (45,400  | )                       |         |        | (17,998  | )       |        |        | (57,345 | )       
|                                      |                                                                                   | Proceeds from the maturity of investment securities available for sale           |                                           |                                                      | 62,260   |                         |         |        | 15,000   |         |        |        |        |         
|                                      |                                                                                   | Proceeds from the sale of investment securities for sale                         |                                           |                                                      |         |                         |         |        | 16,176   |         |        |        |        |         
|                                      |                                                                                   | Purchase of CRA investment                                                       |                                           |                                                      |         |                         |         |        | (4,766   | )       |        |        |        |         
|                                      |                                                                                   | (Increase) decrease in stock in Federal Home Loan Bank                           |                                           |                                                      | (9,160   | )                       |         |        | 4,931    |         |        |        | 3,739   |         
|                                      |                                                                                   | Cash paid to acquire ICCMAC Multifamily and Commercial Trust 1999-1              |                                           |                                                      |         |                         |         |        | (51,069  | )       |        |        |        |         
|                                      |                                                                                   | Purchase of real estate loans                                                    |                                           |                                                      | (207,400 | )                       |         |        | (189,889 | )       |        |        | (91,402 | )       
|                                      |                                                                                   | Decrease (increase) in real estate loans, net                                    |                                           |                                                      | 108,493  |                         |         |        | 75,264   |         |        |        | (16,562 | )       
|                                      |                                                                                   | Repayment of real estate loans held in trust                                     |                                           |                                                      | 47,927   |                         |         |        | 41,264   |         |        |        |        |         
|                                      |                                                                                   | Proceeds from sale of real estate loans                                          |                                           |                                                      | 755      |                         |         |        | 12,720   |         |        |        | 23,501  |         
|                                      |                                                                                   | Proceeds from sale of other real estate owned                                    |                                           |                                                      | 5,687    |                         |         |        | 1,685    |         |        |        | 4,586   |         
|                                      |                                                                                   | Cash paid for capital expenditures                                               |                                           |                                                      | (752     | )                       |         |        | (798     | )       |        |        | (857    | )       
|                                      |                                                                                   | Other, net                                                                       |                                           |                                                      | (331     | )                       |         |        | 33       |         |        |        | 110     |         
|                                      |                                                                                   |                                                                                  |                                           |                                                      |          |                         |         |        |          |         |        |       
|                                      |                                                                                   |                                                                                  | Net cash used in investing activities     |                                                      |          | (37,921                 | )       |        |          | (97,447 | )      |        |         | (134,230 | )      
|                                      |                                                                                   |                                                                                  |                                           |                                                      |          |                         |         |        |          |         |        |       
|Cash Flows From Financing Activities: |                                                                                   |                                                                                  |                                           |                                                      |          |                         |         |        |          |         |        |       
|                                      |                                                                                   | Proceeds from exercise of employee stock options                                 |                                           |                                                      | 74       |                         |         |        | 36       |         |        |        | 542     |         
|                                      |                                                                                   | Cash paid to acquire treasury stock                                              |                                           |                                                      | (14,759  | )                       |         |        | (7,701   | )       |        |        | (515    | )       
|                                      |                                                                                   | Proceeds from issuance of trust preferred securities                             |                                           |                                                      | 14,549   |                         |         |        | 13,580   |         |        |        |        |         
|                                      |                                                                                   | Principal payments on collateralized mortgage obligations                        |                                           |                                                      | (52,498  | )                       |         |        | (43,949  | )       |        |        |        |         
|                                      |                                                                                   | Net (decrease) increase in deposit accounts                                      |                                           |                                                      | (62,045  | )                       |         |        | 102,086  |         |        |        | 46,815  |         
|                                      |                                                                                   | Net proceeds from borrowings from the Federal Home Loan Bank                     |                                           |                                                      | 190,035  |                         |         |        | 12,000   |         |        |        | 18,750  |         
|                                      |                                                                                   |                                                                                  |                                           |                                                      |          |                         |         |        |          |         |        |       
|                                      |                                                                                   |                                                                                  | Net cash provided by financing activities |                                                      |          | 75,356                  |         |        |          | 76,052  |        |        |         | 65,592   |        
|                                      |                                                                                   |                                                                                  |                                           |                                                      |          |                         |         |        |          |         |        |       
|                                      |                                                                                   |                                                                                  |                                           | Net increase (decrease) in cash and cash equivalents |          |                         | 63,291  |        |          |         | (1,292 | )      |         |          | (53,360 | )
|                                      |                                                                                   |                                                                                  |                                           | Cash and cash equivalents at beginning of period     |          |                         | 70,950  |        |          |         | 72,242 |        |         |          | 125,602 |  
|                                      |                                                                                   |                                                                                  |                                           |                                                      |          |                         |         |        |          |         |        |       
|                                      |                                                                                   |                                                                                  |                                           | Cash and cash equivalents at ending of period        |          | $                       | 134,241 |        |          | $       | 70,950 |        |         | $        | 72,242  |  
|                                      |                                                                                   |                                                                                  |                                           |                                                      |          |                         |         |        |          |         |        |       
|Supplemental Cash Flow Information:   |                                                                                   |                                                                                  |                                           |                                                      |          |                         |         |        |          |         |        |       
|                                      |                                                                                   | Cash paid during the period for interest                                         |                                           | $                                                    | 65,073   |                         |         | $      | 68,625   |         |        | $      | 48,150  |         
|                                      |                                                                                   | Cash paid during the period for income taxes                                     |                                           | $                                                    | 9,750    |                         |         | $      | 13,550   |         |        | $      | 15,245  |         
|Non-cash Investing Transactions:      |                                                                                   |                                                                                  |                                           |                                                      |          |                         |         |        |          |         |        |       
|                                      |                                                                                   | Loans transferred to other real estate owned                                     |                                           | $                                                    | 16,961   |                         |         | $      | 3,063    |         |        | $      | 4,826   |         
|                                      |                                                                                   | Loans to facilitate the sale of other real estate owned                          |                                           | $                                                    | 2,050    |                         |         | $      |         |         |        | $      | 390     |         

See accompanying notes to the consolidated financial statements



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 1ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization- ITLA Capital Corporation and Subsidiaries (ITLA Capital,
the Company, or we) is primarily engaged in the origination of loans
secured by income producing real estate. Through our principal operating
subsidiary, Imperial Capital Bank (Imperial or the Bank), the Company
accepts deposits insured by the Federal Deposit Insurance Corporation (FDIC)
which are used primarily to fund the investment in variable rate commercial and
residential real estate loans. During 2000, we acquired 100 percent of the
equity and certain collateralized mortgage obligations (CMOs) of the ICCMAC
Multifamily and Commercial Trust 1999-1 (the ICCMAC Trust), through our
Imperial Capital Real Estate Investment Trust (Imperial Capital REIT)
subsidiary. Additionally, in 2001 and 2000, respectively, we formed ITLA
Capital Statutory Trust II (the Trust Preferred II) and ITLA Capital
Statutory Trust I (the Trust Preferred I), respectively, subsidiaries whose
sole purpose was to issue Guaranteed Preferred Beneficial Interests in the
Companys Junior Subordinated Deferrable Interest Debentures (the Trust
Preferred securities).

Imperial has operated as a California industrial bank since 1974, and
became a publicly traded company in October 1995, when its shares were sold in
an initial public offering. Imperial operates six deposit branches in
California. From its formation in 1974 until December 31, 1999, Imperial
operated under the name Imperial Thrift and Loan Association. Effective
January 1, 2000, Imperial changed its name to Imperial Capital Bank.

Financial Statement Presentation The accounting and reporting policies
of the Company conform to accounting principles generally accepted in the
United States (GAAP) and to prevailing practices within the financial
services industry. The consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiaries. All material intercompany
transactions and balances have been eliminated. Certain amounts in prior
periods have been reclassified to conform to the presentation in the current
period. The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

Cash and Cash Equivalents We consider all highly liquid investments with
original maturities of three months or less when purchased to be cash
equivalents.

Investment Securities Investment securities available for sale are
carried at fair value with unrealized gains or losses reported net of taxes as
a component of other comprehensive income (loss) until realized.



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 1ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)

Real estate loans Real estate loans, which include real estate loans and
real estate loans held in trust, are generally carried at principal amounts
outstanding plus purchase premiums, less charge-offs, net deferred loan
origination fees and other unearned income. Deferred loan origination fees and
other unearned income include deferred unamortized fees net of direct
incremental loan origination costs. Interest income is accrued as earned. Net
purchase premiums or discounts and deferred loan origination fees are amortized
or accreted into interest income using the interest method.

Loans are placed on nonaccrual status when they become 90 days or more
contractually delinquent, or earlier if the collection of interest is
considered by management to be unlikely. When a loan is placed on nonaccrual
status, all previously accrued but uncollected interest is reversed against
current period operating results. Subsequent cash collections on nonaccrual
loans are either recognized as interest income on a cash basis if the loan is
well secured and in managements judgment the net book value is fully
collectible, or recorded as a reduction of principal.

Loans are considered impaired when, based upon current information and
events, it is probable that the Company will be unable to collect all principal
and interest amounts due according to the contractual terms of the loan
agreement on a timely basis. The Company evaluates impairment on a
loan-by-loan basis. Once a loan is determined to be impaired, the impairment
is measured based on the present value of the expected future cash flows
discounted at the loans effective interest rate or by using the loans most
recent market price or the fair value of the collateral if the loan is
collateral dependent.

When the measurement of an impaired loan is less than the recorded amount
of the loan, a valuation allowance is established by recording a charge to the
provision for loan losses. Subsequent increases or decreases in the valuation
allowance for impaired loans are recorded by adjusting the existing valuation
allowance for the impaired loan with a corresponding charge or credit to the
provision for loan losses.

Our policy for recognizing interest income on impaired loans is the same
as that for nonaccrual loans.

Allowance for Loan Losses- We maintain an allowance for loan losses at a
level considered adequate to cover probable losses on loans. In evaluating the
adequacy of the allowance for loan losses, management estimates the amount of
the loss for each loan that has been identified as having more than standard
credit risk. Those estimates give consideration to, among other factors,
economic conditions, estimated real estate collateral value and cash flow, and
the financial strength and commitment of the borrower or guarantors, where
appropriate. Additionally, an estimate for loan loss is calculated for the
remaining portion of the portfolio giving consideration to the Companys
historical loss experience in the portfolio, adjusted, as appropriate, for the
estimated effects of current economic conditions and changes in the composition
of the loan portfolio over time. Loan losses are charged against the allowance
when management believes the uncollectibility of a loan balance, or portion
thereof, has been confirmed.



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 1ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)

Other Real Estate Owned Other real estate owned (OREO) represents real
estate acquired through or in lieu of foreclosure. OREO is held for sale and
is initially recorded at fair value less estimated costs of disposition at the
date of foreclosure, establishing a new cost basis. Subsequent to foreclosure,
valuations are periodically performed by management and the assets are carried
at the lower of cost or estimated fair value less costs of disposition. The
net operating results from OREO are recognized as non-interest expense.

Premises and Equipment Premises and equipment are recorded at cost, less
accumulated depreciation and amortization. Depreciation is calculated on the
straight-line method over the estimated useful lives of the assets ranging from
three to twelve years. Amortization of leasehold improvements is calculated on
the straight-line method over the shorter of the estimated useful lives of the
assets or the corresponding lease term.

Income Taxes Provision for income taxes is the amount of estimated tax
due reported on our tax returns and the change in the amount of deferred tax
assets and liabilities. Deferred income taxes represent the estimated net
income tax expense payable (or benefits receivable) for temporary differences
between the carrying amounts for financial reporting purposes and the amounts
used for tax purposes.

Earnings Per Share- Earnings per share (EPS) for all periods presented
in the consolidated statements of income are computed in accordance with the
provisions of Statement of Financial Accounting Standards (SFAS) No. 128 -
Earnings Per Share, and are based on the weighted-average number of shares
outstanding during each year. Basic EPS excludes dilution and is computed by
dividing income available to common shareholders by the weighted-average number
of common shares outstanding during the period. Diluted EPS includes the
effect of common stock equivalents of the Company, which include only shares
issuable on the exercise of outstanding options. A reconciliation of the
computation of Basic EPS and Diluted EPS is presented in Note 17  Earnings Per
Share.

Stock-Based Compensation Stock-based compensation plan is accounted for
in accordance with Accounting Principles Board (APB) Opinion No. 25 -
Accounting for Stock Issued to Employees. Under APB Opinion No. 25, no
compensation expense is recognized for a stock option grant if the exercise
price of the stock option at measurement date is equal to or greater than the
fair market value of the common stock on the date of grant. We have disclosed
in Note 12  Benefit Plans the pro forma effect on net income and earnings per
share as if we had elected to recognize compensation expense for the stock
options granted.

Comprehensive Income- Comprehensive income is displayed in the
Consolidated Statement of Changes in Shareholders Equity and consists entirely
of the change in net unrealized holding gain or loss on securities classified
as available for sale, net of the related income tax effect.



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 1ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)

New Accounting Pronouncements In June 2001, the FASB issued SFAS No.
141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible
Assets. The Company was required to adopt SFAS No. 141 upon issuance. As
such, all business combinations for which the Company may prospectively enter
must be accounted for as purchase transactions. The Company will adopt SFAS No.
142 on January 1, 2002. The adoption of SFAS No. 142 ceases the current
amortization of goodwill and will instead be subject to at least an annual
assessment for impairment by applying a fair-value-based test. The Company did
not have any goodwill or material identifiable intangibles as of December 31,
2001. The adoption of this statement did not have a material effect on the
Companys financial position or results of operations.

In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. This statement addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets and supercedes or amends previous pronouncements including SFAS No. 121,
Accounting Principles Board Opinion No. 30, and Accounting Research Board No.
51. The Company adopted this statement on January 1, 2002. The adoption of
this statement did not have a material effect on the Companys financial
position or results of operations.



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 2INVESTMENT SECURITIES

The amortized cost and fair value of investment securities as of December
31, 2001 and 2000 are as follows:

|                   |                                           |                        |                                                |   |                |        |       |   |        |        |            |   |     |     |  |   |    |    | 
|------------------ | ----------------------------------------- | ---------------------- | ---------------------------------------------- | - | -------------- | ------ | ----- | - | ------ | ------ | ---------- | - | --- | --- |  | - | -- | -- | 
|                   |                                           |                        |                                                |   |                |        |       |   | Gross  |        | Unrealized
|                   |                                           |                        |                                                |   | Amortized      |        | Fair  |   |       
|                   |                                           |                        |                                                |   | Cost           |        | Value |   | Gains  |        | Losses    
|                   |                                           |                        |                                                |   |                |        |       |   |        |        |           
|                   |                                           |                        |                                                |   | (in thousands)
|December 31, 2001: |                                           |                        |                                                |   |                |        |       |   |        |        |            |   |     |     |  |  
|                   | Investment securities available for sale: |                        |                                                |   |                |        |       |   |        |        |            |   |     |     |  |   |   
|                   |                                           | U.S. Government Agency |                                                | $ | 29,409         |        |       |   | 29,403 |        |            | $ |    |     |  | $ | 6  |   
|                   |                                           | Equity securities      |                                                |   | 14             |        |       |   | 8      |        |            |   |    |     |  |   | 6  |   
|                   |                                           |                        |                                                |   |                |        |       |   |        |        |            |   |     |     |  |  
|                   |                                           |                        | Total investment securities
available for sale |   | $              | 29,423 |       |   |        | 29,411 |            |   | $   |    |  |   | $  | 12 | 
|                   |                                           |                        |                                                |   |                |        |       |   |        |        |            |   |     |     |  |  
|December 31, 2000: |                                           |                        |                                                |   |                |        |       |   |        |        |            |   |     |     |  |  
|                   | Investment securities available for sale: |                        |                                                |   |                |        |       |   |        |        |            |   |     |     |  |   |   
|                   |                                           | U.S. Government Agency |                                                | $ | 46,196         |        |       | $ | 46,319 |        |            | $ | 123 |     |  | $ |   |   
|                   |                                           | Equity securities      |                                                |   | 22             |        |       |   | 6      |        |            |   |    |     |  |   | 16 |   
|                   |                                           |                        |                                                |   |                |        |       |   |        |        |            |   |     |     |  |  
|                   |                                           |                        | Total investment securities
available for sale |   | $              | 46,218 |       |   | $      | 46,325 |            |   | $   | 123 |  |   | $  | 16 | 
|                   |                                           |                        |                                                |   |                |        |       |   |        |        |            |   |     |     |  |  

At December 31, 2001, the carrying value of U.S. government agency
securities available for sale consisted of $9.5 million of securities that
mature within three years with an average yield of 3.83%, and $19.9 million of
securities that mature after three but within five years with an average yield
of 4.39%. The $9.5 million of securities that mature within three years are
callable as follows: $3.5 million in February 2002 and $6.0 million in March
2002 The $19.9 million of securities that mature after three but within five
years are callable as follows: $9.9 million are callable in January 2002, $4.0
million are callable in February 2002, and the $6.0 million are callable in
March 2002. During the first quarter of 2002, we have had $7.0 million of U.
S. government securities called at par by the issuer of the respective
securities.

At December 31, 2000, the carrying value of U.S. government agency
securities available for sale consisted of $33.3 million of securities that
mature in one year or less with an average yield of 6.22%, $10.0 million of
securities that mature within two years with an average yield of 7.05%, which
were callable on February 28, 2001, and $3.0 million of securities maturing
within three years with an average yield of 6.80%, which were callable on
October 11, 2001.

During 2001 and 2000, there were no transfers from the held to maturity
portfolio and no securities were sold prior to their maturity or call date.

There were no gross realized gains or losses on investment securities in
2001 and 1999. Gross realized gains on investment securities were $1.4 million
for the year ended December 31, 2000. There were no gross realized losses on
investment securities for the year ended December 31, 2000.



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 3REAL ESTATE LOANS

Real estate loans are held in the Banks portfolio and consist of the
following:

|                                             |  |                |           |      |  |   |           |  
|-------------------------------------------- |  | -------------- | --------- | ---- |  | - | --------- | -
|                                             |  | December 31   
|                                             |  |               
|                                             |  | 2001           |           | 2000
|                                             |  |                |           |     
|                                             |  | (in thousands)
|Real estate loans                            |  | $              | 1,032,968 |      |  | $ | 967,691   |  
|Construction loans                           |  |                | 54,129    |      |  |   | 95,206    |  
|Franchise loans                              |  |                | 57,618    |      |  |   | 3,912     |  
|                                             |  |                |           |      |  |   |           |  
|                                             |  |                | 1,144,715 |      |  |   | 1,066,809 |  
|Unamortized premium                          |  |                | 4,406     |      |  |   | 4,297     |  
|Deferred loan origination fees, net of costs |  |                | (2,029    | )    |  |   | (2,571    | )
|                                             |  |                |           |      |  |   |           |  
|                                             |  |                | 1,147,092 |      |  |   | 1,068,535 |  
|Allowance for loan losses                    |  |                | (24,722   | )    |  |   | (22,608   | )
|                                             |  |                |           |      |  |   |           |  
|                                             |  | $              | 1,122,370 |      |  | $ | 1,045,927 |  
|                                             |  |                |           |      |  |   |           |  

At December 31, 2001, approximately 84.5%, 5.4% and 10.1% of the Banks
loans collateralized by real estate are secured by income producing properties,
properties under development and residential one-to-four family properties,
respectively. At December 31, 2001, approximately 69.8% of our loans secured
by real estate were collateralized by properties located in California.

At December 31, 2000, approximately 78.1%, 9.3% and 12.6% of the Banks
loans collateralized by real estate are secured by income producing properties,
properties under development and residential one-to-four family properties,
respectively. At December 31, 2000, approximately 65.8% of our loans secured
by real estate were collateralized by properties located in California.

At December 31, 2001, approximately $549.9 million of real estate loans
were pledged to secure a line of credit at the Federal Home Loan Bank (FHLB) of San
Francisco.



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 3REAL ESTATE LOANS(Continued)

The following is the activity in the allowance for loan losses on real
estate loans for the periods indicated.

|                             |                           |                    |                   |                 |        |                                           |        |       |        |        |        |       |        |        |        |  
|---------------------------- | ------------------------- | ------------------ | ----------------- | --------------- | ------ | ----------------------------------------- | ------ | ----- | ------ | ------ | ------ | ----- | ------ | ------ | ------ | -
|                             |                           |                    |                   |                 |        | As of and for the Years Ended December 31
|                             |                           |                    |                   |                 |        |                                          
|                             |                           |                    |                   |                 |        | 2001                                      |        | 2000  |        | 1999  
|                             |                           |                    |                   |                 |        |                                           |        |       |        |       
|                             |                           |                    |                   |                 |        | (In thousands)                           
|Balance at beginning of year |                           | $                  | 22,608            |                 |        | $                                         | 19,895 |       |        | $      | 16,811 |      
|                             | Provision for loan losses |                    |                   | 7,225           |        |                                           |        | 4,775 |        |        |        | 4,950 |       
|                             | Charge-offs:              |                    |                   |                 |        |                                           |        |       |        |        |        |       |       
|                             |                           | Real estate loans  |                   |                 | (2,845 | )                                         |        |       | (1,453 | )      |        |       | (2,088 | )     
|                             |                           | Construction loans |                   |                 | (2,419 | )                                         |        |       | (1,000 | )      |        |       |       |       
|                             |                           |                    |                   |                 |        |                                           |        |       |        |        |        |      
|                             |                           |                    | Total charge-offs |                 |        | (5,264                                    | )      |       |        | (2,453 | )      |       |        | (2,088 | )     
|                             |                           |                    |                   |                 |        |                                           |        |       |        |        |        |      
|                             | Recoveries:               |                    |                   |                 |        |                                           |        |       |        |        |        |       |       
|                             |                           | Real estate loans  |                   |                 | 153    |                                           |        |       | 391    |        |        |       | 222    |       
|                             |                           |                    |                   |                 |        |                                           |        |       |        |        |        |      
|                             |                           |                    | Total recoveries  |                 |        | 153                                       |        |       |        | 391    |        |       |        | 222    |       
|                             |                           |                    |                   |                 |        |                                           |        |       |        |        |        |      
|                             |                           |                    |                   | Net charge-offs |        |                                           | (5,111 | )     |        |        | (2,062 | )     |        |        | (1,866 | )
|                             |                           |                    |                   |                 |        |                                           |        |       |        |        |        |      
|Balance at end of year       |                           | $                  | 24,722            |                 |        | $                                         | 22,608 |       |        | $      | 19,895 |      
|                             |                           |                    |                   |                 |        |                                           |        |       |        |        |        |      

As of December 31, 2001 and 2000, the accrual of income had been suspended
on approximately $15.0 million and $17.4 million, respectively, of loans
secured by real estate. Interest income that was contractually due on loans
that were on nonaccrual status that was not recognized during the years ended
December 31, 2001, 2000 and 1999 was approximately $2.1 million, $679,000 and
$574,000, respectively.

As of December 31, 2001 and 2000, restructured loans totaled $3.8 million
and $4.4 million, respectively. There were no related commitments to lend
additional funds on restructured loans. For the years ended December 31, 2001,
2000 and 1999, $376,000, $826,000 and $1.4 million, respectively, of gross
interest income would have been recorded had the loans been current in
accordance with their original terms compared to $340,000, $780,000 and $1.4
million, respectively, of interest income which was included in net income for
the same periods. The average yield on restructured loans was 8.79% at
December 31, 2001.



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 3REAL ESTATE LOANS(Continued)

The Banks recorded investment in impaired loans, and the related
valuation allowance, were as follows:

|                                |                      |   |                   |        |                   |   |            |     |           |   |        |        |  |   |       |       | 
|------------------------------- | -------------------- | - | ----------------- | ------ | ----------------- | - | ---------- | --- | --------- | - | ------ | ------ |  | - | ----- | ----- | 
|                                |                      |   | December 31, 2001 |        | December 31, 2000
|                                |                      |   |                   |        |                  
|                                |                      |   | Recorded          |        | Valuation         |   | Recorded   |     | Valuation
|                                |                      |   | Investment        |        | Allowance         |   | Investment |     | Allowance
|                                |                      |   |                   |        |                   |   |            |     |          
|                                |                      |   | (in thousands)    |        | (in thousands)   
|                                |                      |   |                   |        |                  
|Valuation allowance required    |                      | $ | 1,600             |        |                   | $ | 506        |     |           | $ | 11,086 |        |  | $ | 1,818 |      
|No valuation allowance required |                      |   | 15,111            |        |                   |   |           |     |           |   | 7,021  |        |  |   |      |      
|                                |                      |   |                   |        |                   |   |            |     |           |   |        |        |  |   |       |      
|                                | Total impaired loans |   | $                 | 16,711 |                   |   | $          | 506 |           |   | $      | 18,107 |  |   | $     | 1,818 | 
|                                |                      |   |                   |        |                   |   |            |     |           |   |        |        |  |   |       |      

All impaired loans with a valuation allowance were on nonaccrual status at
December 31, 2001. The average recorded investment in impaired loans for the
years ended December 31, 2001, 2000 and 1999 was $26.0 million, $13.4 million
and $8.7 million, respectively. Interest income recognized on impaired loans
for the years ended December 31, 2001, 2000 and 1999 was $89,000, $368,000 and
$414,000, respectively.

Loans having carrying values of $17.0 million and $3.1 million were
transferred to OREO in 2001 and
2000, respectively.



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 4ICCMAC MULTIFAMILY AND COMMERCIAL TRUST 1999-1

Real estate loans held in trust consisted of the following:

|                          |  |                |         |      |  |   |         |  
|------------------------- |  | -------------- | ------- | ---- |  | - | ------- | -
|                          |  | December 31   
|                          |  |               
|                          |  | 2001           |         | 2000
|                          |  |                |         |     
|                          |  | (in thousands)
|Real estate loans         |  | $              | 158,720 |      |  | $ | 209,297 |  
|Unamortized premium       |  |                | 5,366   |      |  |   | 7,003   |  
|                          |  |                |         |      |  |   |         |  
|                          |  |                | 164,086 |      |  |   | 216,300 |  
|Allowance for loan losses |  |                | (1,928  | )    |  |   | (4,578  | )
|                          |  |                |         |      |  |   |         |  
|                          |  | $              | 162,158 |      |  | $ | 211,722 |  
|                          |  |                |         |      |  |   |         |  

The following is the activity in the allowance for loan losses relating to
real estate loans held in the ICCMAC Trust as follows:

|                                      |  |                |        |      |  |   |       |  
|------------------------------------- |  | -------------- | ------ | ---- |  | - | ----- | -
|                                      |  | December 31   
|                                      |  |               
|                                      |  | 2001           |        | 2000
|                                      |  |                |        |     
|                                      |  | (in thousands)
|Balance at beginning of year          |  | $              | 4,578  |      |  | $ |      |  
|Additions due to purchases            |  |                |       |      |  |   | 4,614 |  
|Reversal
of provision for loan losses |  |                | (2,650 | )    |  |   |      |  
|Charge-offs                           |  |                |       |      |  |   | (36   | )
|                                      |  |                |        |      |  |   |       |  
|Balance at end of year                |  | $              | 1,928  |      |  | $ | 4,578 |  
|                                      |  |                |        |      |  |   |       |  

At December 31, 2001 and 2000, our recorded investment in impaired loans
of the ICCMAC Trust was $329,000 and $740,000, respectively. There was no valuation allowance
required on these loans. The average recorded investment in impaired real
estate loans of the ICCMAC Trust was $510,000 and $946,000 at December 31, 2001
and 2000. There was no interest income recognized on these impaired loans for
the years ended December 31, 2001 and 2000.



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 4ICCMAC MULTIFAMILY AND COMMERCIAL TRUST 1999-1
(Continued)

The following is a summary of the outstanding CMOs of the ICCMAC Trust:

|                     |  |                 |         |                |  |        |         |   |  |             |      |               |  |     |   |  |  | 
|-------------------- |  | --------------- | ------- | -------------- |  | ------ | ------- | - |  | ----------- | ---- | ------------- |  | --- | - |  |  | 
|                     |  |                 |         |                |  |        |         |   |  |             |      | Interest Rate |  |     |   | 
|                     |  |                 |         |                |  |        |         |   |  |             |      | Margin over   |  |     |   | 
|                     |  | Recorded Amount |         | 6 month        |  |        |         |  
|Class                |  | December 31,    |         | LIBOR          |  | Rating
|                     |  |                 |         |                |  |       
|                     |  |                 |         | 2001           |  | 2000   |         |   |  |             |      |               |  |    
|                     |  |                 |         |                |  |        |         |   |  |             |      |               |  |    
|                     |  |                 |         | (in thousands) |  |        |         |   |  |             |      |              
|A-1                  |  | $               |        |                |  | $      | 18,540  |   |  |             | 0.28 | %             |  | AAA
|A-2                  |  |                 | 63,134  |                |  |        | 94,831  |   |  |             | 0.42 | %             |  | AAA
|S                    |  |                 | 3,130   |                |  |        | 5,400   |   |  | zero coupon |      | AAA          
|A-3                  |  |                 | 17,447  |                |  |        | 17,447  |   |  |             | 0.60 | %             |  | AAA
|B                    |  |                 | 11,631  |                |  |        | 11,631  |   |  |             | 0.88 | %             |  | AA 
|C                    |  |                 | 14,539  |                |  |        | 14,539  |   |  |             | 1.55 | %             |  |     | A | 
|                     |  |                 |         |                |  |        |         |   |  |             |      |               |  |     |   | 
|                     |  |                 | 109,881 |                |  |        | 162,388 |   |  |             |      |               |  |     |   | 
|Unamortized Discount |  |                 | (233    | )              |  |        | (536    | ) |  |             |      |               |  |     |   | 
|                     |  |                 |         |                |  |        |         |   |  |             |      |               |  |     |   | 
|                     |  | $               | 109,648 |                |  | $      | 161,852 |   |  |             |      |               |  |     |   | 
|                     |  |                 |         |                |  |        |         |   |  |             |      |               |  |     |   | 

The interest rate on the variable rate CMOs adjusts monthly and the
repayment of the bonds is based on the cash flows of the underlying loan
portfolio.

NOTE 5OTHER REAL ESTATE OWNED

Other real estate owned was stated as follows:

|                                      |                              |   |                |        |      |   |       |       | 
|------------------------------------- | ---------------------------- | - | -------------- | ------ | ---- | - | ----- | ----- | 
|                                      |                              |   | December 31   
|                                      |                              |   |               
|                                      |                              |   | 2001           |        | 2000
|                                      |                              |   |                |        |     
|                                      |                              |   | (in thousands)
|Other real estate owned held for sale |                              | $ | 14,115         |        |      | $ | 2,377 |      
|Less: valuation allowance             |                              |   | (374           | )      |      |   | (127  | )    
|                                      |                              |   |                |        |      |   |       |      
|                                      | Other real estate owned, net |   | $              | 13,741 |      |   | $     | 2,250 | 
|                                      |                              |   |                |        |      |   |       |      



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 5OTHER REAL ESTATE OWNED(Continued)

The activity in the allowance for other real estate owned was as follows:

|                             |                                                  |   |                         |     |      |   |      |      |   |   |     |      |  
|---------------------------- | ------------------------------------------------ | - | ----------------------- | --- | ---- | - | ---- | ---- | - | - | --- | ---- | -
|                             |                                                  |   | As of and for the Years
|                             |                                                  |   | Ended December 31      
|                             |                                                  |   |                        
|                             |                                                  |   | 2001                    |     | 2000 |   | 1999
|                             |                                                  |   |                         |     |      |   |     
|                             |                                                  |   | (in thousands)         
|Balance at beginning of year |                                                  | $ | 127                     |     |      | $ | 207  |      |   | $ | 221 |     
|                             | Provision for losses on other real estate owned  |   |                         | 269 |      |   |      | 167  |   |   |     | 195  |  
|                             | Charge-offs upon sale of other real estate owned |   |                         | (22 | )    |   |      | (247 | ) |   |     | (209 | )
|                             |                                                  |   |                         |     |      |   |      |      |   |   |     |     
|Balance at end of year       |                                                  | $ | 374                     |     |      | $ | 127  |      |   | $ | 207 |     
|                             |                                                  |   |                         |     |      |   |      |      |   |   |     |     

NOTE 6PREMISES AND EQUIPMENT

Premises and equipment are stated at cost less accumulated depreciation
and amortization and consist of the following:

|                                          |  |                |        |      |  |   |        |  
|----------------------------------------- |  | -------------- | ------ | ---- |  | - | ------ | -
|                                          |  | December 31   
|                                          |  |               
|                                          |  | 2001           |        | 2000
|                                          |  |                |        |     
|                                          |  | (in thousands)
|Furniture, fixtures and equipment         |  | $              | 4,115  |      |  | $ | 3,706  |  
|Leasehold improvements                    |  |                | 4,246  |      |  |   | 4,487  |  
|Automobiles                               |  |                | 340    |      |  |   | 265    |  
|                                          |  |                |        |      |  |   |        |  
|                                          |  |                | 8,701  |      |  |   | 8,458  |  
|Accumulated depreciation and amortization |  |                | (6,524 | )    |  |   | (5,768 | )
|                                          |  |                |        |      |  |   |        |  
|                                          |  | $              | 2,177  |      |  | $ | 2,690  |  
|                                          |  |                |        |      |  |   |        |  

Depreciation and amortization expense on premises and equipment for the
years ended December 31, 2001, 2000 and 1999 was $836,000, $796,000 and
$987,000, respectively.



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 7DEPOSIT ACCOUNTS

Deposit accounts consist of the following:

|                                    |  |                |         |      |  |   |           | 
|----------------------------------- |  | -------------- | ------- | ---- |  | - | --------- | 
|                                    |  | December 31   
|                                    |  |               
|                                    |  | 2001           |         | 2000
|                                    |  |                |         |     
|                                    |  | (in thousands)
|Money market and passbook accounts  |  | $              | 158,188 |      |  | $ | 102,868   | 
|Time certificates under $100,000    |  |                | 526,911 |      |  |   | 572,851   | 
|Time certificates $100,000 and over |  |                | 268,555 |      |  |   | 339,980   | 
|                                    |  |                |         |      |  |   |           | 
|                                    |  | $              | 953,654 |      |  | $ | 1,015,699 | 
|                                    |  |                |         |      |  |   |           | 

Money market and passbook accounts have no contractual maturity and pay
interest at rates ranging from 2.97% to 4.97% per annum, the weighted average
contractual interest rate of the Banks money market and passbook accounts was
2.71% and 5.93% at December 31, 2001 and 2000, respectively.
Additionally, some money market accounts have limited checking features which
allow three check withdrawals per month. Time certificates have maturities
ranging from 30 days to five years and bear interest at varying rates based on
market conditions, ranging from 2.23% to 8.72% per annum. The weighted average
contractual interest rate of the Banks time certificate
accounts was 4.24% and 6.60% at December 31, 2001 and 2000, respectively.

There were no brokered deposits at December 31, 2001 and 2000. Interest
expense on time certificates $100,000 and over for the years ended December 31,
2001, 2000 and 1999 amounted to approximately $16.1 million, $17.4 million and
$12.9 million, respectively.

The Bank is a member of the FDIC and its deposits are insured up to
$100,000 each per insured depositor.

As of December 31, 2001, the contractual maturities of time certificate
accounts were as follows:

|                 |  |                |         | 
|---------------- |  | -------------- | ------- | 
|Year of Maturity |  | Amount        
|                 |  |               
|                 |  | (in thousands)
|2002             |  | $              | 638,998 | 
|2003             |  |                | 131,772 | 
|2004             |  |                | 21,566  | 
|2006             |  |                | 3,130   | 
|                 |  |                |         | 
|                 |  | $              | 795,466 | 
|                 |  |                |         | 



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 8LINES OF CREDIT

As of December 31, 2001 and 2000, the Bank had uncommitted, unsecured
lines of credit with two banks renewable daily in the amount of $30.0 million.
There were no borrowings against these lines at December 31, 2001 and 2000.



|NOTE 9 | GUARANTEED PREFERRED BENEFICIAL INTERESTS IN COMPANYS
JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
|------- | ---------------------------------------------------------------------------------------------------------

The Company has two wholly-owned trust subsidiaries, ITLA Capital
Statutory Trust I (Trust I) and ITLA Capital Statutory Trust II (Trust II).
Trust I issued $14.0 million of 10.60% cumulative trust preferred securities
in September 2000 and Trust II issued $15.0 million of 10.20% cumulative trust
preferred securities in February 2001 (referred to collectively as the Trust
Preferred securities). ITLA Capital has fully and unconditionally guaranteed
the Trust Preferred securities along with all obligations of each trust under
their respective trust agreements. Each trust was formed for the exclusive
purpose of issuing their respective Trust Preferred securities and common
securities and using the proceeds to acquire ITLA Capitals junior subordinated
deferrable interest debentures. Trust I acquired an aggregate principal amount
of $14.4 million of ITLA Capitals 10.60% junior subordinated deferrable
interest debentures due September 7, 2030 that pays dividends each March 7 and
September 7 during the term of this security. Trust II acquired an aggregate
principal amount of $15.5 million of ITLA Capitals 10.20% junior subordinated
deferrable interest debentures due February 22, 2031 that pays dividends each
February 22 and August 22 during the term of this security. The sole assets of
each trust are the debentures it holds. Each of the debentures is redeemable,
in whole or in part, at ITLA Capitals option on or after ten years after
issuance, at declining premiums to maturity. The Company used the proceeds from
the debentures for general corporate purposes, including an aggregate of $28.0
million in capital contributions to the Bank to support future growth. The
costs associated with the Trust Preferred securities issuance have been
capitalized and are being amortized using a method that approximates the
interest method over a period of ten years. The accrued distributions payable
on the Trust Preferred securities are reflected as Minority interest in income
of subsidiary in the Consolidated Statements of Income. The Trust preferred
securities are reflected on the Consolidated Statement of Financial Condition
as Guaranteed Preferred Beneficial Interests in the Companys Junior
Subordinated Deferrable Interest Debentures. The recorded balance of Trust
Preferred securities was $28.1 million and $13.5 million at December 31, 2001
and 2000, respectively. Minority interest in income of subsidiary was $3.0
million for the year ended December 31, 2001 as compared to $478,000 for the
same period last year.



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 10FHLB ADVANCES

FHLB advances represent collateralized obligations with the FHLB of San
Francisco, and are summarized by contractual maturity as follows:

|                 |  |                |         | 
|---------------- |  | -------------- | ------- | 
|Year of Maturity |  | Amount        
|                 |  |               
|                 |  | (in thousands)
|2002             |  | $              | 227,300 | 
|2003             |  |                | 5,750   | 
|2004             |  |                | 6,000   | 
|2006             |  |                | 15,705  | 
|2008             |  |                | 5,000   | 
|2009             |  |                | 9,530   | 
|                 |  |                |         | 
|                 |  | $              | 269,285 | 
|                 |  |                |         | 

We have pledged real estate loans with a carrying value of $549.9 million,
and cash equivalents and investment securities available for sale with a
carrying value of $29.4 million, for a total of $579.3 million of assets
pledged as collateral for this borrowing facility. The total borrowing
capacity available from the collateral that has been pledged is approximately
$361.4 million, of which $269.3 million has been utilized as of December 31,
2001.

The following table represents the maximum month-end balance outstanding,
weighted-average daily balance outstanding, average rates paid during the year,
and the average rates on the balance at year-end for FHLB advances:

|                                           |  |                        |         |      |  |   |        |  
|------------------------------------------ |  | ---------------------- | ------- | ---- |  | - | ------ | -
|                                           |  | December 31           
|                                           |  |                       
|                                           |  | 2001                   |         | 2000
|                                           |  |                        |         |     
|                                           |  | (dollars in thousands)
|Maximum month-end balance outstanding      |  | $                      | 269,285 |      |  | $ | 79,250 |  
|Weighted-average daily balance outstanding |  | $                      | 103,675 |      |  | $ | 30,366 |  
|Average rates paid during the year         |  |                        | 4.62    | %    |  |   | 5.84   | %
|Average rates on balance at year-end       |  |                        | 2.99    | %    |  |   | 6.56   | %
|Balance at year-end                        |  | $                      | 269,285 |      |  | $ | 79,250 |  



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 11NONRECURRING GENERAL AND ADMINISTRATIVE EXPENSES

Nonrecurring general and administrative expenses of $1.4 million were
recognized during the year ended December 31, 2000. The nonrecurring expenses
consist primarily of the write-off of fixed assets, leasehold improvements and
estimated costs related to sublease contracts on leased premises at market
rates that are lower than the contractual lease rate. These expenses were the
result of the consolidation of the Banks headquarters with the Companys
headquarters in La Jolla, California in March 2000.

Activity in the allowance for restructuring charges for the years ended
December 31, 2001 and 2000 was as follows:

|                                    |  |           |       |          |  |          |      |                  |  |  |      |   |  |   |   | 
|----------------------------------- |  | --------- | ----- | -------- |  | -------- | ---- | ---------------- |  |  | ---- | - |  | - | - | 
|                                    |  | Allowance |       | 2000     |  | 2001     |      |                  |  | 
|                                    |  | Provided  |       | Charges  |  | Charges  |      | Ending Balance  
|                                    |  | In 2000   |       | incurred |  | incurred |      | December 31,2001
|                                    |  |           |       |          |  |          |      |                 
|Write-off of leasehold
improvements |  | $         | 847   |          |  |          | (693 | )                |  |  | (154 | ) |  | $ |  | 
|Costs related to sublease contract  |  |           | 553   |          |  |          | (211 | )                |  |  | (342 | ) |  |   |  | 
|                                    |  |           |       |          |  |          |      |                  |  |  |      |   |  |   |   | 
|Total                               |  | $         | 1,400 |          |  |          | (904 | )                |  |  | (496 | ) |  | $ |  | 
|                                    |  |           |       |          |  |          |      |                  |  |  |      |   |  |   |   | 

NOTE 12BENEFIT PLANS

Salary Savings Plan. We have a salary savings plan (the Savings Plan)
that qualifies as a deferred salary arrangement under Section 401(k) of the
Internal Revenue Code. Under the Savings Plan, participating employees may
defer a portion of their pretax earnings, up to 15% of their compensation. We
match 50% of each employees salary deferral, up to a maximum 6% of the
employees salary. Employees vest in employer contributions and the earnings
thereon over a five-year period. Our matching contributions to the Savings
Plan were $112,000, $118,000 and $147,000 in 2001, 2000 and 1999, respectively.

Nonqualified Deferred Compensation Plans. We have deferred compensation
plans designed to provide additional retirement benefits for certain officers
and key employees who cannot take full advantage of the Savings Plan. There
were no costs associated with these deferred compensation plans in 2001 and
2000.



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 12BENEFIT PLANS(Continued)

Long-Term Supplemental Executive Retirement Plan. We have adopted a
Long-Term Supplemental Executive Retirement Plan (the SERP) for certain
officers and key employees which provides for participants to be awarded shares
of common stock of the Company on a tax deferred basis from the current
Recognition and Retention Plan (RRP) previously approved by the shareholders.
Such shares vest in three-year cycles or earlier at the discretion of the
Compensation Committee of the Board of Directors, and once vested, may be
distributed to participants upon a change in control or the participants
death, disability, retirement date or date of termination of employment.
During 1998, we issued shares of common stock, representing the remaining
number of unissued shares authorized to be awarded under the RRP, to a Rabbi
Trust managed by a third-party financial institution. For 2001 and 1999,
113,864 and 58,017 shares, respectively, were allocated to designated SERP
accounts for the future benefit of certain Company executives. No shares were
allocated during 2000. We recognized $674,000, $264,000 and $528,000 of
compensation expense from the SERP/RRP in 2001, 2000 and 1999 respectively.

Stock Plans. We adopted an employee stock incentive plan and stock option
plan for nonemployee directors (collectively, the Stock Plan) which provides
for the award of up to 1,311,500 shares of common stock to officers, directors
and employees as compensation for future services, not to exceed a combined
550,000 shares during 1995, the first year of the Stock Plan, with annual
awards thereafter limited to 100,000 additional shares. An amendment to the
Stock Plan increasing the number of shares authorized for award under the Stock
Plan by 311,500 shares was approved by the Companys shareholders on June 29, 2001.
As of December 31, 2001, we granted an aggregate of 1,232,000 options under the
Stock Plan, of which 92,749 have been exercised and 325,001 have been
forfeited. The exercise price per share of the options granted ranges from
$10.00 to $19.37 per share and generally vest 33-1/3% per year, beginning with
the first anniversary of the date of each individual grant.



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 12BENEFIT PLANS(Continued)

The number of options and weighted-average exercise prices of options for
each of the following groups of options, for the periods indicated, are as
follows:

|                                                 |                                   |  |                   |         |                 |  |         |          |      |   |                  |       |  |   |       |       | 
|------------------------------------------------ | --------------------------------- |  | ----------------- | ------- | --------------- |  | ------- | -------- | ---- | - | ---------------- | ----- |  | - | ----- | ----- | 
|                                                 |                                   |  |                   |         |                 |  |         |          |      |   | Weighted-Average
|                                                 |                                   |  | Number of Options |         | Exercise Prices
|                                                 |                                   |  |                   |         |                
|                                                 |                                   |  | 2001              |         | 2000            |  | 2001    |          | 2000
|                                                 |                                   |  |                   |         |                 |  |         |          |     
|Options outstanding at the beginning of
the year |                                   |  | 756,250           |         |                 |  | 789,500 |          |      | $ | 12.75            |       |  | $ | 13.26 |      
|                                                 | Options granted during the year   |  |                   | 80,000  |                 |  |         | 119,000  |      |   | $                | 16.25 |  |   | $     | 12.20 | 
|                                                 | Options exercised during the year |  |                   | (6,000  | )               |  |         | (3,833   | )    |   | $                | 12.40 |  |   | $     | 10.35 | 
|                                                 | Options forfeited during the year |  |                   | (16,000 | )               |  |         | (148,417 | )    |   | $                | 14.64 |  |   | $     | 15.07 | 
|                                                 |                                   |  |                   |         |                 |  |         |          |      |   |                  |       |  |   |       |      
|Options outstanding at the end of the year       |                                   |  | 814,250           |         |                 |  | 756,250 |          |      | $ | 13.07            |       |  | $ | 12.75 |      
|                                                 |                                   |  |                   |         |                 |  |         |          |      |   |                  |       |  |   |       |      
|Options exercisable at the end of the year       |                                   |  | 661,583           |         |                 |  | 569,333 |          |      | $ | 12.78            |       |  | $ | 12.33 |      
|                                                 |                                   |  |                   |         |                 |  |         |          |      |   |                  |       |  |   |       |      

The fair value of each option grant was estimated on the date of grant
using an option pricing model with the following weighted-average assumptions
for option grants:

|                            |  |                                                 |             |      |  |      |             |  |  |  |             | 
|--------------------------- |  | ----------------------------------------------- | ----------- | ---- |  | ---- | ----------- |  |  |  | ----------- | 
|                            |  | Weighted-Average Assumptions for Options Grants
|                            |  |                                                
|                            |  | 2001                                            |             | 2000 |  | 1999
|                            |  |                                                 |             |      |  |     
|Dividend Yield              |  |                                                 | 0.0%        |      |  |      | 0.0%        |  |  |  | 0.0%        | 
|Expected Volatility         |  |                                                 | 30.41%      |      |  |      | 31.2%       |  |  |  | 31.9%       | 
|Risk-Free Interest rates    |  |                                                 | 4.79%-5.13% |      |  |      | 5.89%-6.79% |  |  |  | 4.72%       | 
|Expected Lives              |  |                                                 | Seven Years |      |  |      | Seven Years |  |  |  | Seven Years | 
|Weighted-Average Fair Value |  |                                                 | $7.14-$8.37 |      |  |      | $5.36-$6.84 |  |  |  | $6.18       | 

We account for the Stock Plan under APB Opinion No. 25 and, accordingly,
no compensation costs have been recognized in the accompanying consolidated
statements of income for 2001, 2000 or 1999. If compensation costs for the
Stock Plan had been determined under SFAS No. 123  Accounting for Stock-Based
Compensation, pro forma net income would have been $18.1 million, $17.8
million and $15.7 million and Diluted Earnings Per Share would have been $2.72,
$2.46 and $2.14 for the years ended December 31, 2001, 2000 and 1999,
respectively.



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 13INCOME TAXES

Deferred income taxes reflect the net effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.

Significant components of our deferred tax assets and liabilities are as
follows:

|                                          |                                                             |                                |                        |       |                |        |      |       |        |        | 
|----------------------------------------- | ----------------------------------------------------------- | ------------------------------ | ---------------------- | ----- | -------------- | ------ | ---- | ----- | ------ | ------ | 
|                                          |                                                             |                                |                        |       | December 31   
|                                          |                                                             |                                |                        |       |               
|                                          |                                                             |                                |                        |       | 2001           |        | 2000
|                                          |                                                             |                                |                        |       |                |        |     
|                                          |                                                             |                                |                        |       | (in thousands)
|Components of the deferred tax asset:     |                                                             |                                |                        |       |                |        |      |      
|                                          | Allowance for loan losses                                   |                                | $                      | 9,899 |                |        | $    | 9,509 |       
|                                          | Accrued expenses                                            |                                |                        | 3,060 |                |        |      | 2,655 |       
|                                          | State income taxes                                          |                                |                        | 1,076 |                |        |      | 1,198 |       
|                                          | Other real estate owned                                     |                                |                        | 745   |                |        |      | 144   |       
|                                          | Permanent impairment on equity security                     |                                |                        |      |                |        |      | 156   |       
|                                          | Unrealized loss on investment securities available for sale |                                |                        | 5     |                |        |      |      |       
|                                          |                                                             |                                |                        |       |                |        |      |      
|                                          |                                                             | Total deferred tax assets      |                        |       | 14,785         |        |      |       | 13,662 |       
|                                          |                                                             |                                |                        |       |                |        |      |      
|Components of the deferred tax liability: |                                                             |                                |                        |       |                |        |      |      
|                                          | Deferred loan origination costs                             |                                |                        | 1,244 |                |        |      | 1,116 |       
|                                          | FHLB stock dividends                                        |                                |                        | 1,267 |                |        |      | 1,195 |       
|                                          | Unrealized gain on investment securities available for sale |                                |                        |      |                |        |      | 16    |       
|                                          | Other                                                       |                                |                        | 405   |                |        |      | 33    |       
|                                          |                                                             |                                |                        |       |                |        |      |      
|                                          |                                                             | Total deferred tax liabilities |                        |       | 2,916          |        |      |       | 2,360  |       
|                                          |                                                             |                                |                        |       |                |        |      |      
|                                          |                                                             |                                | Net deferred tax asset |       | $              | 11,869 |      |       | $      | 11,302 | 
|                                          |                                                             |                                |                        |       |                |        |      |      

The deferred tax asset is considered fully realizable, as when the
temporary differences associated with the deferred tax asset are recognized for
income tax purposes, those deductions are expected to be fully offset, either
by carryback against previously taxed income or by reducing future taxable
income. Accordingly, we have not established a valuation allowance on the
deferred tax asset.



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 13INCOME TAXES(Continued)

A summary of the provision for income taxes follows:

|                              |         |   |                         |        |      |   |        |       |   |   |        |        |  
|----------------------------- | ------- | - | ----------------------- | ------ | ---- | - | ------ | ----- | - | - | ------ | ------ | -
|                              |         |   | Years Ended December 31
|                              |         |   |                        
|                              |         |   | 2001                    |        | 2000 |   | 1999  
|                              |         |   |                         |        |      |   |       
|                              |         |   | (in thousands)         
|Current provision:            |         |   |                         |        |      |   |        |       |   |   |        |       
|                              | Federal |   | $                       | 9,824  |      |   | $      | 9,912 |   |   | $      | 11,362 |  
|                              | State   |   |                         | 2,115  |      |   |        | 3,289 |   |   |        | 3,759  |  
|                              |         |   |                         |        |      |   |        |       |   |   |        |       
|                              |         |   | 11,939                  |        |      |   | 13,201 |       |   |   | 15,121 |       
|                              |         |   |                         |        |      |   |        |       |   |   |        |       
|Deferred provision (benefit): |         |   |                         |        |      |   |        |       |   |   |        |       
|                              | Federal |   |                         | (1,007 | )    |   |        | (804  | ) |   |        | (2,841 | )
|                              | State   |   |                         | 461    |      |   |        | (517  | ) |   |        | (1,010 | )
|                              |         |   |                         |        |      |   |        |       |   |   |        |       
|                              |         |   | (546                    | )      |      |   | (1,321 | )     |   |   | (3,851 | )     
|                              |         |   |                         |        |      |   |        |       |   |   |        |       
|                              |         | $ | 11,393                  |        |      | $ | 11,880 |       |   | $ | 11,270 |       
|                              |         |   |                         |        |      |   |        |       |   |   |        |       

A reconciliation of the federal statutory income tax rate to the effective
income tax rate is as follows:

|                                                    |                           |  |                         |      |      |  |      |      |   |  |      |      |  
|--------------------------------------------------- | ------------------------- |  | ----------------------- | ---- | ---- |  | ---- | ---- | - |  | ---- | ---- | -
|                                                    |                           |  | Years Ended December 31
|                                                    |                           |  |                        
|                                                    |                           |  | 2001                    |      | 2000 |  | 1999
|                                                    |                           |  |                         |      |      |  |     
|Federal statutory income tax rate                   |                           |  | 35.0                    | %    |      |  | 35.0 | %    |   |  | 35.0 | %   
|State income tax, net of federal income tax
benefit |                           |  | 7.0                     | %    |      |  | 7.0  | %    |   |  | 7.0  | %   
|State income tax credit and other benefits          |                           |  | (3.4                    | %)   |      |  | (2.4 | %)   |   |  | (1.0 | %)  
|                                                    |                           |  |                         |      |      |  |      |      |   |  |      |     
|                                                    | Effective income tax rate |  |                         | 38.6 | %    |  |      | 39.6 | % |  |      | 41.0 | %
|                                                    |                           |  |                         |      |      |  |      |      |   |  |      |     

The income tax (benefit) expense component of other comprehensive income
was $(21,000), $(580,000) and $595,000 for the years ended December 31, 2001,
2000 and 1999, respectively.



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 14FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

We are a party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of our customers. These
financial instruments consist of commitments to extend credit. These
instruments may involve, to varying degrees, elements of credit and interest
rate risk in excess of the amount recognized in the balance sheet. The
contractual amounts of those instruments reflect the extent of involvement we
have in particular classes of financial instruments.

We have exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit. This
exposure is represented by the contractual amount of those instruments as the
Company uses the same lending policies for these instruments as it does for the
loan portfolio. We had outstanding unfunded loan commitments, including the
unfunded portion of construction loans, of approximately $60.6 million and
$53.1 million at December 31, 2001 and 2000, respectively.

NOTE 15COMMITMENTS AND CONTINGENCIES

Commitments

We lease office facilities under noncancelable operating leases.
Estimated future minimum lease payments required under leases with initial or
remaining noncancelable terms in excess of one year at December 31, 2001 are as
follows:

|                 |            |      |        |                |       | 
|---------------- | ---------- | ---- | ------ | -------------- | ----- | 
|                 |            |      |        | (in thousands)
|                 |            | 2002 |        | $              | 1,808 | 
|                 |            | 2003 |        |                | 1,678 | 
|                 |            | 2004 |        |                | 1,288 | 
|                 |            | 2005 |        |                | 1,032 | 
|                 |            | 2006 |        |                | 607   | 
|                 | Thereafter |      |        |               |      
|                 |            |      |        |               
|                 |            |      | 6,413  |               
|Sub-Lease income |            |      | (1,914 | )             
|                 |            |      |        |               
|                 |            | $    | 4,499  |               
|                 |            |      |        |               

Certain leases contain rental escalation clauses based on increases in the
Consumer Price Index, and renewal options of up to ten years which may be
exercised by the Company. We incurred rent expense of $2.1 million, $1.6
million and $1.7 million in 2001, 2000 and 1999, respectively.

Contingencies

We are subject to various pending legal actions which arise in the normal
course of business. We maintain reserves for losses from legal actions which
are both probable and estimable. Although the amount of the ultimate exposure,
if any, cannot be determined at this time, in managements opinion, based upon
advice of counsel, the disposition of claims currently pending will not have a
material adverse effect on our financial condition or results of operations.



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 16REGULATORY REQUIREMENTS

The Bank is subject to supervision and regulation by the FDIC and the
Department of Financial Institutions (DFI) of the State of California under
the provisions of the California Banking Law. These provisions authorize the
Banks issuance of certificates of deposit, place limits on the size of loans
the Bank can make, and specify the maintenance of minimum liquidity levels.

The Bank is also subject to various capital requirements administered by
the FDIC. Failure to meet minimum capital requirements can initiate certain
mandatory and possibly additional discretionary action by regulators that, if
undertaken, could have a direct material effect on the Banks financial
statements and ultimately the consolidated financial statements of the Company.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines that involve
quantitative measures of the Banks assets, liabilities and certain
off-balance-sheet items as calculated under regulatory accounting practices.
The Banks capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings and other
factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
following table) of Total and Tier 1 capital to risk-weighted assets, and of
Tier 1 capital to average total assets (Leverage Ratio). Management
believes, as of December 31, 2001 and 2000, that the Bank meets all applicable
capital adequacy requirements.

As of December 31, 2001, the most recent notification from the FDIC
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized, the Bank
must maintain minimum Total Risk-Based, Tier 1 Risk-Based and Tier 1 Leverage
Ratios as set forth in the following table. There are no conditions or events
since that notification that management believes have changed the Banks
category.



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 16REGULATORY REQUIREMENTS(Continued)

The Banks actual regulatory capital amounts and ratios are presented in
the following table:

|                                         |  |   |                        |  |          |  |             |   |       |   |                  |  |                     |  |     |   |  |   |         |  |  |  |      |   | 
|---------------------------------------- |  | - | ---------------------- |  | -------- |  | ----------- | - | ----- | - | ---------------- |  | ------------------- |  | --- | - |  | - | ------- |  |  |  | ---- | - | 
|                                         |  |   |                        |  |          |  |             |   |       |   | Minimum          |  | Capital Required to
|                                         |  |   |                        |  |          |  |             |   |       |   | Requirement for  |  | Maintain           
|                                         |  |   |                        |  |          |  |             |   |       |   | Capital Adequacy |  | "Well Capitalized" 
|                                         |  |   | Actual                 |  | Purposes |  | Designation
|                                         |  |   |                        |  |          |  |            
|                                         |  |   | Amount                 |  | Ratio    |  | Amount      |   | Ratio |   | Amount           |  | Ratio              
|                                         |  |   |                        |  |          |  |             |   |       |   |                  |  |                    
|                                         |  |   | (dollars in thousands)
|As of December 31, 2001                  |  |   |                        |  |          |  |             |   |       |   |                  |  |                     |  |     |   |  |   |         |  |  |  |      |  
|Total capital
(to risk-weighted assets)  |  | $ | 138,818                |  |          |  | 12.0        | % |       | $ | 92,690           |  |                     |  | 8.0 | % |  | $ | 115,862 |  |  |  | 10.0 | %
|Tier I capital
(to risk-weighted assets) |  | $ | 124,209                |  |          |  | 10.7        | % |       | $ | 46,345           |  |                     |  | 4.0 | % |  | $ | 69,517  |  |  |  | 6.0  | %
|Tier I capital
(to average total assets) |  | $ | 124,209                |  |          |  | 10.1        | % |       | $ | 49,156           |  |                     |  | 4.0 | % |  | $ | 61,445  |  |  |  | 5.0  | %
|As of December 31, 2000                  |  |   |                        |  |          |  |             |   |       |   |                  |  |                     |  |     |   |  |   |         |  |  |  |      |  
|Total capital
(to risk-weighted assets)  |  | $ | 124,025                |  |          |  | 11.6        | % |       | $ | 85,403           |  |                     |  | 8.0 | % |  | $ | 106,754 |  |  |  | 10.0 | %
|Tier I capital
(to risk-weighted assets) |  | $ | 110,581                |  |          |  | 10.4        | % |       | $ | 42,702           |  |                     |  | 4.0 | % |  | $ | 64,052  |  |  |  | 6.0  | %
|Tier I capital
(to average total assets) |  | $ | 110,581                |  |          |  | 9.1         | % |       | $ | 48,504           |  |                     |  | 4.0 | % |  | $ | 60,630  |  |  |  | 5.0  | %



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 17EARNINGS PER SHARE

The following is a reconciliation of the amounts used in the calculation
of Basic Earnings Per Share and Diluted Earnings Per Share.

|                             |                                  |  |                                       |        |             |  |           |       |           |  |   |       |  
|---------------------------- | -------------------------------- |  | ------------------------------------- | ------ | ----------- |  | --------- | ----- | --------- |  | - | ----- | -
|                             |                                  |  |                                       |        |             |  | Weighted- |       |           |  |  
|                             |                                  |  |                                       |        |             |  | Average   |       |           |  |  
|                             |                                  |  |                                       |        |             |  | Shares    |       | Per Share
|                             |                                  |  | Net Income                            |        | Outstanding |  | Amount   
|                             |                                  |  |                                       |        |             |  |          
|                             |                                  |  | (in thousands, except per share data)
|Year Ended December 31, 2001 |                                  |  |                                       |        |             |  |           |       |           |  |   |      
|                             | Basic Earnings Per Share         |  | $                                     | 18,151 |             |  |           | 6,427 |           |  | $ | 2.82  |  
|                             | Dilutive Effect of Stock Options |  |                                       |       |             |  |           | 241   |           |  |   | (0.10 | )
|                             |                                  |  |                                       |        |             |  |           |       |           |  |   |      
|                             | Diluted Earnings Per Share       |  | $                                     | 18,151 |             |  |           | 6,668 |           |  | $ | 2.72  |  
|                             |                                  |  |                                       |        |             |  |           |       |           |  |   |      
|Year Ended December 31, 2000 |                                  |  |                                       |        |             |  |           |       |           |  |   |      
|                             | Basic Earnings Per Share         |  | $                                     | 18,139 |             |  |           | 7,046 |           |  | $ | 2.57  |  
|                             | Dilutive Effect of Stock Options |  |                                       |       |             |  |           | 192   |           |  |   | (0.06 | )
|                             |                                  |  |                                       |        |             |  |           |       |           |  |   |      
|                             | Diluted Earnings Per Share       |  | $                                     | 18,139 |             |  |           | 7,238 |           |  | $ | 2.51  |  
|                             |                                  |  |                                       |        |             |  |           |       |           |  |   |      
|Year Ended December 31, 1999 |                                  |  |                                       |        |             |  |           |       |           |  |   |      
|                             | Basic Earnings Per Share         |  | $                                     | 16,205 |             |  |           | 7,182 |           |  | $ | 2.26  |  
|                             | Dilutive Effect of Stock Options |  |                                       |       |             |  |           | 157   |           |  |   | (0.05 | )
|                             |                                  |  |                                       |        |             |  |           |       |           |  |   |      
|                             | Diluted Earnings Per Share       |  | $                                     | 16,205 |             |  |           | 7,339 |           |  | $ | 2.21  |  
|                             |                                  |  |                                       |        |             |  |           |       |           |  |   |      



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 18DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value estimates are based on judgments regarding credit risk,
expectations of future economic conditions, normal cost of administration of
these instruments and other risk characteristics, including interest rate risk
and prepayment risk. These estimates are subjective in nature, involve
uncertainties and matters of significant judgment and therefore cannot be
determined with precision. Changes in assumptions could significantly affect
the estimates. The fair value estimates presented do not include the value of
anticipated future business and the value of assets and liabilities that are
not considered financial instruments.

We use the following methods and assumptions to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
value:

| |                                                                                                                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Cash and Cash Equivalents The carrying values reported in the
balance sheet approximate fair values due to the short-term nature of the
assets.                                                                                                                                                                                                                                           
|
| | Investment Securities Fair values are based on bid prices and
quotations published and/or received from established securities dealers.                                                                                                                                                                                                                                                   
|
| | Stock in Federal Home Loan Bank The fair value is based on bid
prices quoted from the FHLB.                                                                                                                                                                                                                                                                                               
|
| | Real estate loans and Real Estate Loans Held in Trust for
Collateralized Mortgage Obligations The fair value is estimated using
the present value of future cash flows, discounted using the current rate
at which similar loans would be made to borrowers with similar credit
ratings and for the same maturities and giving consideration to estimated
prepayment risk and credit risk.
|
| | Accrued Interest Receivable The carrying values reported in the
balance sheet approximate the fair values due to the short-term nature of
the asset.                                                                                                                                                                                                                                      
|
| | Deposit Accounts The fair value of money market and passbook
accounts is estimated to be the amount payable on demand due to the
short-term nature of these deposits. The fair values for time
certificates, both over and under $100,000, are estimated by discounting
the expected cash flows at current market rates over expected maturities.                                         
|
| | Federal Home Loan Bank Advances The fair value is estimated by
discounting the expected cash flows at current market rates over
contractual maturities.                                                                                                                                                                                                                                   



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 18DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS(Continued)

The carrying amounts and estimated fair values of our financial
instruments are as follows:

|                            |                                                                                                           |   |                |           |           |   |          |           |            |   |        |           |  |   |        |           | 
|--------------------------- | --------------------------------------------------------------------------------------------------------- | - | -------------- | --------- | --------- | - | -------- | --------- | ---------- | - | ------ | --------- |  | - | ------ | --------- | 
|                            |                                                                                                           |   | December 31   
|                            |                                                                                                           |   |               
|                            |                                                                                                           |   | 2001           |           | 2000     
|                            |                                                                                                           |   |                |           |          
|                            |                                                                                                           |   | Cost or        |           | Estimated |   | Cost or  |           |            |   |       
|                            |                                                                                                           |   | Carrying       |           | Fair      |   | Carrying |           | Estimated 
|                            |                                                                                                           |   | Amount         |           | Value     |   | Amount   |           | Fair Value
|                            |                                                                                                           |   |                |           |           |   |          |           |           
|                            |                                                                                                           |   | (in thousands)
|Financial assets:           |                                                                                                           |   |                |           |           |   |          |           |            |   |        |           |  |   |        |          
|                            | Cash and cash equivalents                                                                                 |   | $              | 134,241   |           |   | $        | 134,241   |            |   | $      | 70,950    |  |   | $      | 70,950    | 
|                            | Investment securities                                                                                     |   |                | 29,411    |           |   |          | 29,411    |            |   |        | 46,325    |  |   |        | 46,325    | 
|                            | Stock in Federal Home Loan Bank                                                                           |   |                | 13,464    |           |   |          | 13,464    |            |   |        | 3,963     |  |   |        | 3,963     | 
|                            | Real estate loans, net                                                                                    |   |                | 1,122,370 |           |   |          | 1,125,322 |            |   |        | 1,045,927 |  |   |        | 1,057,537 | 
|                            | Real estate loans held in trust, net                                                                      |   |                | 162,158   |           |   |          | 159,176   |            |   |        | 211,722   |  |   |        | 206,271   | 
|Accrued interest receivable |                                                                                                           | $ | 11,144         |           |           | $ | 11,144   |           |            | $ | 11,821 |           |  | $ | 11,821 |          
|Financial liabilities:      |                                                                                                           |   |                |           |           |   |          |           |            |   |        |           |  |   |        |          
|                            | Deposit accounts                                                                                          |   | $              | 953,654   |           |   | $        | 946,671   |            |   | $      | 1,015,699 |  |   | $      | 1,002,831 | 
|                            | Federal Home Loan Bank advances                                                                           |   |                | 269,285   |           |   |          | 268,198   |            |   |        | 79,250    |  |   |        | 79,292    | 
|                            | Collateralized mortgage obligations                                                                       |   |                | 109,648   |           |   |          | 110,127   |            |   |        | 161,852   |  |   |        | 161,963   | 
|                            | Guaranteed preferred beneficial
interests in companys junior
subordinated deferrable interest
debentures |   |                | 28,118    |           |   |          | 28,118    |            |   |        | 13,519    |  |   |        | 13,526    | 



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 19-BUSINESS SEGMENT INFORMATION

SFAS No. 131  Disclosures About Segments of an Enterprise and Related
Information requires disclosure of segment information in a manner consistent
with the management approach. The management approach is based on the way
the chief operating decision-maker organizes segments within a company for
making operating decisions and assessing performance.

The main factors that we used to identify our operating segments were the
specific product and business lines of the various operating segments of the
Company. Our operating segments are organized separately by product and
service offered. We have identified one operating segment that meets the
criteria of being a reportable segment in accordance with the provisions of
SFAS No. 131. This reportable segment is the origination and purchase of
commercial and residential real estate loans, which by its legal form, is
identified as operations of the Bank and Imperial Capital REIT. This segment
derives the majority of its revenue by originating and purchasing loans secured
by income producing real estate. Other operating segments of the Company that
did not meet the criteria of being a reportable segment in accordance with SFAS
No. 131 have been aggregated and reported as All Other. Transactions from
all of our operating segments occur in the United States. The Company has no
transactions with a single external customer that exceeds ten percent of the
Companys consolidated revenues.

Transactions between the reportable segment of the Company and its other
operating segments are made at terms which approximate arms-length
transactions and in accordance with GAAP. There is no significant difference
between the measurement of the reportable segments assets and profits and
losses disclosed below and the measurement of assets and profits and losses in
our consolidated balance sheet and statement of income. Accounting allocations
are made in the same manner for all operating segments.



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 19BUSINESS SEGMENT INFORMATION(Continued)

Required reported segment information for 2001, 2000 and 1999 is detailed
below:

|                                              |                                                           |  |                |           |           |  |              |         |              |  |   |          |   |  |   |           | 
|--------------------------------------------- | --------------------------------------------------------- |  | -------------- | --------- | --------- |  | ------------ | ------- | ------------ |  | - | -------- | - |  | - | --------- | 
|                                              |                                                           |  | Origination    |           |           |  |              |         |              |  |   |          |   |  |  
|                                              |                                                           |  | and Purchase   |           |           |  |              |         |              |  |   |          |   |  |  
|                                              |                                                           |  | of Real Estate |           |           |  |              |         |              |  |   |          |   |  |  
|                                              |                                                           |  | Loans          |           | All Other |  | Eliminations |         | Consolidated
|                                              |                                                           |  |                |           |           |  |              |         |             
|As of or for the Year Ended December 31, 2001 |                                                           |  |                |           |           |  |              |         |              |  |   |          |   |  |   |          
|                                              | Revenues from external customers                          |  | $              | 125,154   |           |  | $            | 3,329   |              |  | $ | (4,329   | ) |  | $ | 124,154   | 
|                                              | Total interest income                                     |  |                | 124,109   |           |  |              | 3,315   |              |  |   | (4,329   | ) |  |   | 123,095   | 
|                                              | Total interest expense                                    |  |                | 65,303    |           |  |              | 2,889   |              |  |   | (4,329   | ) |  |   | 63,863    | 
|                                              | Depreciation and amortization expense                     |  |                | 411       |           |  |              | 425     |              |  |   |         |   |  |   | 836       | 
|                                              | Provision for income taxes                                |  |                | 9,172     |           |  |              | 2,221   |              |  |   |         |   |  |   | 11,393    | 
|                                              | Capital expenditures                                      |  |                | 321       |           |  |              | 431     |              |  |   |         |   |  |   | 752       | 
|                                              | Deferred income taxes                                     |  |                | 10,840    |           |  |              | 929     |              |  |   | 100      |   |  |   | 11,869    | 
|                                              | Total assets                                              |  |                | 1,519,440 |           |  |              | 200,639 |              |  |   | (211,771 | ) |  |   | 1,508,308 | 
|                                              | Income (loss) before provisions for income taxes          |  | $              | 33,064    |           |  | $            | (3,520  | )            |  | $ |         |   |  | $ | 29,544    | 
|As of or for the Year Ended December 31, 2000 |                                                           |  |                |           |           |  |              |         |              |  |   |          |   |  |   |          
|                                              | Revenues from external customers                          |  | $              | 126,499   |           |  | $            | 1,468   |              |  | $ | (1,861   | ) |  | $ | 126,106   | 
|                                              | Total interest income                                     |  |                | 124,168   |           |  |              | 1,468   |              |  |   | (1,861   | ) |  |   | 123,775   | 
|                                              | Total interest expense                                    |  |                | 70,029    |           |  |              | 464     |              |  |   | (1,851   | ) |  |   | 68,642    | 
|                                              | Depreciation and amortization expense                     |  |                | 425       |           |  |              | 371     |              |  |   |         |   |  |   | 796       | 
|                                              | Provision for income taxes                                |  |                | 10,492    |           |  |              | 1,388   |              |  |   |         |   |  |   | 11,880    | 
|                                              | Capital expenditures                                      |  |                | 387       |           |  |              | 411     |              |  |   |         |   |  |   | 798       | 
|                                              | Deferred income taxes                                     |  |                | 8,481     |           |  |              | 2,821   |              |  |   |         |   |  |   | 11,302    | 
|                                              | Total assets                                              |  |                | 1,426,298 |           |  |              | 166,484 |              |  |   | (177,639 | ) |  |   | 1,415,143 | 
|                                              | Income before provision for income taxes                  |  | $              | 29,757    |           |  | $            | 262     |              |  | $ |         |   |  | $ | 30,019    | 
|As of or for the Year Ended December 31, 1999 |                                                           |  |                |           |           |  |              |         |              |  |   |          |   |  |   |          
|                                              | Revenues from external customers                          |  | $              | 99,888    |           |  | $            | 2,226   |              |  | $ |         |   |  | $ | 102,114   | 
|                                              | Total interest income                                     |  |                | 98,889    |           |  |              | 2,324   |              |  |   |         |   |  |   | 101,213   | 
|                                              | Total interest expense                                    |  |                | 48,402    |           |  |              | 58      |              |  |   |         |   |  |   | 48,460    | 
|                                              | Depreciation and amortization expense                     |  |                | 690       |           |  |              | 297     |              |  |   |         |   |  |   | 987       | 
|                                              | Provision (benefit) for income taxes                      |  |                | 11,643    |           |  |              | (373    | )            |  |   |         |   |  |   | 11,270    | 
|                                              | Capital expenditures                                      |  |                | 497       |           |  |              | 360     |              |  |   |         |   |  |   | 857       | 
|                                              | Deferred income taxes                                     |  |                | 8,050     |           |  |              | 1,351   |              |  |   |         |   |  |   | 9,401     | 
|                                              | Total assets                                              |  |                | 1,087,162 |           |  |              | 129,785 |              |  |   | (101,124 | ) |  |   | 1,115,823 | 
|                                              | Income (loss) before provision (benefit) for
income taxes |  | $              | 28,392    |           |  | $            | (917    | )            |  | $ |         |   |  | $ | 27,475    | 



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 20PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENTS

The parent company only financial statements of ITLA Capital are as follows:

Condensed Balance Sheets

|                                          |                                               |   |                |         |      |   |         |         | 
|----------------------------------------- | --------------------------------------------- | - | -------------- | ------- | ---- | - | ------- | ------- | 
|                                          |                                               |   | December 31   
|                                          |                                               |   |               
|                                          |                                               |   | 2001           |         | 2000
|                                          |                                               |   |                |         |     
|                                          |                                               |   | (in thousands)
|Assets                                    |                                               |   |                |         |      |   |         |        
|Cash and cash equivalents                 |                                               | $ | 1,233          |         |      | $ | 410     |        
|Investment securities available for sale  |                                               |   | 7              |         |      |   | 6       |        
|Investments in wholly-owned subsidiaries: |                                               |   |                |         |      |   |         |        
|                                          | Imperial Capital Bank                         |   |                | 124,287 |      |   |         | 110,811 | 
|                                          | Imperial Capital Real Estate Investment Trust |   |                | 37,603  |      |   |         | 33,954  | 
|                                          | ITLA Capital Statutory Trust 1                |   |                | 425     |      |   |         | 416     | 
|                                          | ITLA Capital Statutory Trust II               |   |                | 476     |      |   |         |        | 
|                                          | Other subsidiaries                            |   |                | 356     |      |   |         | 609     | 
|Other assets                              |                                               |   | 5,587          |         |      |   | 5,195   |        
|                                          |                                               |   |                |         |      |   |         |        
|                                          | Total assets                                  |   | $              | 169,974 |      |   | $       | 151,401 | 
|                                          |                                               |   |                |         |      |   |         |        
|Liabilities and Shareholders Equity      |                                               |   |                |         |      |   |         |        
|Junior subordinated debentures            |                                               | $ | 29,897         |         |      | $ | 14,000  |        
|Liabilities                               |                                               |   | 2,148          |         |      |   | 3,847   |        
|Shareholders equity                      |                                               |   | 137,929        |         |      |   | 133,554 |        
|                                          |                                               |   |                |         |      |   |         |        
|                                          | Total liabilities and shareholders equity    |   | $              | 169,974 |      |   | $       | 151,401 | 
|                                          |                                               |   |                |         |      |   |         |        



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 20PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENTS(Continued)

Condensed Statements of Income

|                                                                                           |                                                          |            |        |                         |        |      |        |       |        |   |        |       |        | 
|------------------------------------------------------------------------------------------ | -------------------------------------------------------- | ---------- | ------ | ----------------------- | ------ | ---- | ------ | ----- | ------ | - | ------ | ----- | ------ | 
|                                                                                           |                                                          |            |        | Years Ended December 31
|                                                                                           |                                                          |            |        |                        
|                                                                                           |                                                          |            |        | 2001                    |        | 2000 |        | 1999 
|                                                                                           |                                                          |            |        |                         |        |      |        |      
|                                                                                           |                                                          |            |        | (in thousands)         
|Interest income                                                                            |                                                          | $          | 302    |                         |        | $    | 962    |       |        | $ | 2,263  |      
|Interest expense                                                                           |                                                          |            | 2,889  |                         |        |      | 464    |       |        |   |       |      
|                                                                                           |                                                          |            |        |                         |        |      |        |       |        |   |        |      
|Net interest (expense) income                                                              |                                                          |            | (2,587 | )                       |        |      | 498    |       |        |   | 2,263  |      
|Reversal of provision for loan losses                                                      |                                                          |            | (1,200 | )                       |        |      |       |       |        |   |       |      
|Non-interest income:                                                                       |                                                          |            |        |                         |        |      |        |       |        |   |        |      
|                                                                                           | Gain on sale of investment securities
available for sale |            |        |                        |        |      |        | 1,412 |        |   |        |      |       
|                                                                                           | Other                                                    |            |        |                        |        |      |        | (6    | )      |   |        |      |       
|                                                                                           |                                                          |            |        |                         |        |      |        |       |        |   |        |      
|Total non-interest income                                                                  |                                                          |            |       |                         |        |      | 1,406  |       |        |   |       |      
|Non-interest expense:                                                                      |                                                          |            |        |                         |        |      |        |       |        |   |        |      
|                                                                                           | General and Administrative expense                       |            |        | 2,062                   |        |      |        | 1,517 |        |   |        | 2,832 |       
|                                                                                           |                                                          |            |        |                         |        |      |        |       |        |   |        |      
|(Loss) income before income tax expense
(benefit) and equity in net income of
subsidiaries |                                                          |            | (3,449 | )                       |        |      | 387    |       |        |   | (569   | )    
|Income tax expense (benefit)                                                               |                                                          |            | 2,260  |                         |        |      | 1,431  |       |        |   | (225   | )    
|                                                                                           |                                                          |            |        |                         |        |      |        |       |        |   |        |      
|Loss before equity in net income of subsidiaries                                           |                                                          |            | (5,709 | )                       |        |      | (1,044 | )     |        |   | (344   | )    
|Equity in net income of subsidiaries                                                       |                                                          |            | 23,860 |                         |        |      | 19,183 |       |        |   | 16,549 |      
|                                                                                           |                                                          |            |        |                         |        |      |        |       |        |   |        |      
|                                                                                           |                                                          | NET INCOME |        | $                       | 18,151 |      |        | $     | 18,139 |   |        | $     | 16,205 | 
|                                                                                           |                                                          |            |        |                         |        |      |        |       |        |   |        |      



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ITLA CAPITAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2001, 2000, AND 1999

NOTE 20PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENTS(Continued)

Condensed Statements of Cash Flows

|                                      |                            |                                                                       |                                                     |                                                      |         |                         |       |        |         |         |        |        |         |        |        |  
|------------------------------------- | -------------------------- | --------------------------------------------------------------------- | --------------------------------------------------- | ---------------------------------------------------- | ------- | ----------------------- | ----- | ------ | ------- | ------- | ------ | ------ | ------- | ------ | ------ | -
|                                      |                            |                                                                       |                                                     |                                                      |         | Years Ended December 31
|                                      |                            |                                                                       |                                                     |                                                      |         |                        
|                                      |                            |                                                                       |                                                     |                                                      |         | 2001                    |       | 2000   |         | 1999   
|                                      |                            |                                                                       |                                                     |                                                      |         |                         |       |        |         |        
|                                      |                            |                                                                       |                                                     |                                                      |         | (in thousands)         
|Cash Flows From Operating Activities: |                            |                                                                       |                                                     |                                                      |         |                         |       |        |         |         |        |       
|                                      | Net income                 |                                                                       | $                                                   | 18,151                                               |         |                         | $     | 18,139 |         |         | $      | 16,205 |        
|                                      | Adjustments to net income: |                                                                       |                                                     |                                                      |         |                         |       |        |         |         |        |        |        
|                                      |                            | Equity in undistributed net income of subsidiaries                    |                                                     |                                                      | (23,856 | )                       |       |        | (19,193 | )       |        |        | (16,549 | )     
|                                      |                            | Reversal of provision for loan losses                                 |                                                     |                                                      | (1,200  | )                       |       |        |        |         |        |        |        |       
|                                      |                            | Permanent impairment on investment in equity securities               |                                                     |                                                      |        |                         |       |        |        |         |        |        | 375     |       
|                                      |                            | Gain on sale of investment securities                                 |                                                     |                                                      |        |                         |       |        | (1,412  | )       |        |        |        |       
|                                      |                            | Decrease (increase) in other assets                                   |                                                     |                                                      | 1,043   |                         |       |        | (2,200  | )       |        |        | (1,010  | )     
|                                      |                            | Increase in liabilities                                               |                                                     |                                                      | 656     |                         |       |        | 1,091   |         |        |        | 910     |       
|                                      |                            |                                                                       |                                                     |                                                      |         |                         |       |        |         |         |        |       
|                                      |                            |                                                                       | Net cash used in operating activities               |                                                      |         | (5,206                  | )     |        |         | (3,575  | )      |        |         | (69    | )     
|                                      |                            |                                                                       |                                                     |                                                      |         |                         |       |        |         |         |        |       
|Cash Flows From Investing Activities: |                            |                                                                       |                                                     |                                                      |         |                         |       |        |         |         |        |       
|                                      |                            | Proceeds from sale of investment securities available for sale        |                                                     |                                                      |        |                         |       |        | 16,176  |         |        |        |        |       
|                                      |                            | Purchases of investment securities available for sale                 |                                                     |                                                      |        |                         |       |        |        |         |        |        | (14,776 | )     
|                                      |                            | Cash paid to acquire ICCMAC Trust                                     |                                                     |                                                      |        |                         |       |        | (33,497 | )       |        |        |        |       
|                                      |                            | Capital contribution to Imperial Capital Bank                         |                                                     |                                                      | (14,549 | )                       |       |        | (13,475 | )       |        |        | (25     | )     
|                                      |                            | Cash paid for common equity of Trust Preferred I                      |                                                     |                                                      |        |                         |       |        | (433    | )       |        |        |        |       
|                                      |                            | Cash paid for common equity of Trust Preferred II                     |                                                     |                                                      | (475    | )                       |       |        |        |         |        |        |         |       
|                                      |                            | Dividends received from Imperial Capital Bank                         |                                                     |                                                      | 15,600  |                         |       |        | 17,300  |         |        |        | 6,000   |       
|                                      |                            | Dividend received from ITLA Funding Corp                              |                                                     |                                                      | 200     |                         |       |        |        |         |        |        |         |       
|                                      |                            | Dividends received from ITLA Management Company                       |                                                     |                                                      |        |                         |       |        | 1,000   |         |        |        |        |       
|                                      |                            | Dividends received from Imperial Capital Real Estate Investment Trust |                                                     |                                                      | 5,050   |                         |       |        | 2,775   |         |        |        |        |       
|                                      |                            | Dividend received from ITLA Commercial Investment Corporation         |                                                     |                                                      |        |                         |       |        |        |         |        |        | 25      |       
|                                      |                            | Other, net                                                            |                                                     |                                                      | 339     |                         |       |        | 7       |         |        |        | 9       |       
|                                      |                            |                                                                       |                                                     |                                                      |         |                         |       |        |         |         |        |       
|                                      |                            |                                                                       | Net cash provided by (used in) investing activities |                                                      |         | 6,165                   |       |        |         | (10,147 | )      |        |         | (8,767 | )     
|                                      |                            |                                                                       |                                                     |                                                      |         |                         |       |        |         |         |        |       
|Cash Flows From Financing Activities: |                            |                                                                       |                                                     |                                                      |         |                         |       |        |         |         |        |       
|                                      |                            | Sale of subordinated debentures to Trust Preferred I, net             |                                                     |                                                      |        |                         |       |        | 13,580  |         |        |        |        |       
|                                      |                            | Sale of subordinated debentures to Trust Preferred II, net            |                                                     |                                                      | 14,549  |                         |       |        |        |         |        |        |        |       
|                                      |                            | Proceeds from exercise of employee stock options                      |                                                     |                                                      | 74      |                         |       |        | 36      |         |        |        | 542     |       
|                                      |                            | Cash paid to acquire treasury stock                                   |                                                     |                                                      | (14,759 | )                       |       |        | (7,701  | )       |        |        | (515    | )     
|                                      |                            |                                                                       |                                                     |                                                      |         |                         |       |        |         |         |        |       
|                                      |                            |                                                                       | Net cash provided by (used in) financing activities |                                                      |         | (136                    | )     |        |         | 5,915   |        |        |         | 27     |       
|                                      |                            |                                                                       |                                                     |                                                      |         |                         |       |        |         |         |        |       
|                                      |                            |                                                                       |                                                     | Net increase (decrease) in cash and cash equivalents |         |                         | 823   |        |         |         | (7,807 | )      |         |        | (8,809 | )
|                                      |                            |                                                                       |                                                     | Cash and cash equivalents at beginning of period     |         |                         | 410   |        |         |         | 8,217  |        |         |        | 17,026 |  
|                                      |                            |                                                                       |                                                     |                                                      |         |                         |       |        |         |         |        |       
|                                      |                            |                                                                       |                                                     | Cash and cash equivalents at end of period           |         | $                       | 1,233 |        |         | $       | 410    |        |         | $      | 8,217  |  
|                                      |                            |                                                                       |                                                     |                                                      |         |                         |       |        |         |         |        |       



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NOTE 21 SUBSEQUENT EVENTS
(UNAUDITED)

On March 28, 2002, the Company disposed of most of its residential loan
portfolio through the securitization of $86.3 million of single family mortgages
and the sale of $17.6 million of the remaining single family mortgages in a
whole loan sale.

During the first quarter of 2002, the Bank completed its acquisition of
Asahi Bank of California (Asahi Bank) a wholly-owned subsidiary of Asahi Bank
Ltd  Japan (ABLJ), for approximately $14.9 million. The acquisition was
structured as a statutory merger of Asahi Bank into the Bank. On the date of
acquisition, Asahi Bank had total assets of approximately $50 million, including
$35 million of commercial real estate and business loans and $15 million of cash
and securities which were acquired by the Bank at the closing of the
transaction.



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|Item 9. | Changes In and
Disagreements With Accountants on Accounting and Financial Disclosure
|------- | ------------------------------------------------------------------------------------

None.






|Item 10. | Directors and Executive Officers of the Registrant
|-------- | --------------------------------------------------

Executive Officers and Directors of the Registrant

The executive officers of the Registrant are identified below.

|                     |  |     |    |          |  |                                                                                            
|-------------------- |  | --- | -- | -------- |  | -------------------------------------------------------------------------------------------
|Name                 |  | Age |    | Position
|                     |  |     |    |         
|George W. Haligowski |  |     | 47 |          |  | Chairman of the Board, President and Chief Executive Officer of ITLA
Capital and the Bank  
|                    
|Norval L. Bruce      |  |     | 60 |          |  | Vice Chairman of the Board and Chief Credit Officer of ITLA Capital
and the Bank           
|                    
|Timothy M. Doyle     |  |     | 45 |          |  | Senior Managing Director and Chief Financial Officer of ITLA Capital
and the Bank          
|                    
|Don Nickbarg         |  |     | 49 |          |  | Senior Managing Director  Chief Operating Officer of ITLA Capital
and the Bank            
|                    
|Steven C. Romelt     |  |     | 52 |          |  | Managing Director and Chief Lending Officer of ITLA Capital
and the Bank                   
|                    
|William A. Schack    |  |     | 40 |          |  | Managing
Director  Director of Loan Operations of ITLA Capital
and the Bank               
|                    
|Scott A. Wallace     |  |     | 39 |          |  | Managing Director  Chief Administrative Officer and Treasurer of
ITLA
Capital and the Bank
|                    
|Anthony A. Rusnak    |  |     | 38 |          |  | First Vice President, General Counsel and Corporate Secretary of ITLA
Capital and the Bank 

George W. Haligowskihas served as ITLA Capitals Chairman of the Board,
President and Chief Executive Officer since inception. He has also served as
the Banks Chairman of the Board and Chief Executive Officer since 1992, and
was the Banks President from 1992 to October 1997. In 2000 he was reinstated
as the President of the Bank. From 1990 to the present, he has also served as
President, Chief Executive Officer and Principal of Halivest International,
Ltd., an international finance and asset management company. He was previously
employed as a Vice President by Shearson Lehman Hutton (1988 to 1990) and
Prudential-Bache Securities (1983 to 1988), and by Avco Financial Services as
Regional Director of its Japanese branch operations (1976 to 1981), as Training
Coordinator for Avco Thrift and Loan (1976) and as a Branch Manager (1974 to
1976).

Norval L. Brucehas served as the Vice Chairman and Chief Credit Officer
for ITLA Capital and the Bank since June of 1999. He was previously President
and Chief Operating Officer of the Bank from October 1997 to June 1999, and
previously was the Executive Vice President and Chief Credit Officer of the
Bank from 1990 to October 1997. Mr. Bruce is also a director of the Bank.
From 1988 to 1989, he served as Executive Vice President and Chief Credit
Officer of Security Pacific Bank, Nevada. He was previously employed by
Security Pacific Bank from 1965 to 1988 in a variety of positions including
management positions in which he was responsible for both loan origination and
credit quality.



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Timothy M. Doylehas served as Senior Managing Director and Chief Financial
Officer of ITLA Capital and the Bank since May 2000. He was previously Managing
Director and Chief Administrative Officer of ITLA Capital and the Bank since
1996. Before joining the Bank, he was the Controller and Director of
Operations at Northeastern Plastics from 1995 to 1996; Assistant Controller of
Alpha Wire Corporation from 1992 to 1994; and Vice President and Chief
Financial Officer of Halivest International, Ltd. from 1989 to 1991. From 1982
to 1988, he was the Corporate Controller of the Shepaug Corporation.

Don Nickbarghas served as Senior Managing Director and Chief Operating Officer
of ITLA Capital and the Bank since November 2001. He has served in several
other capacities, including Managing Director of Asset Acquisition and New
Business Development, Chief Administrative Officer as well as Treasurer. Prior
to joining ITLA Capital in 1998, he was a consultant with Centennial
International LLC from 1996 to 1998; Chief Financial Officer of AIOC
Corporation from 1994 to 1996; Vice President and Team Leader at The Chase
Manhattan Bank from 1991 to 1994; Vice President and Treasurer of Drexel
Burnham Lambert Holdings, Ltd. from 1986 to 1990; Vice President with The Hong
Kong and Shanghi Banking Company from 1980 to 1986; and Assistant Treasurer
with the Swiss Bank Corporation from 1976 to 1980.

Steven C. Romelthas served as Managing Director and Chief Lending Officer
of the Bank since February 2002. He was previously Senior Vice President and
Chief Lending Officer of ITLA Capital and the Bank since January 1997. He was
Director of Bank Lending for the Bank from November 1996 to January 1997.
Previously, he was Vice President and Regional Manager for Southern Pacific
Bank from March 1995 to November 1996. He also held various senior level
lending positions for the Bank from December 1990 to March 1995 and held
various lending positions with a number of other financial institutions from
1979 to December 1990.

William A. Schackis Managing Director  Director of Loan Operations
of ITLA Capital and the Bank since November 2001. He was previously
First Vice President  Director of Portfolio
Management and Loan Administration of ITLA Capital and the Bank since
April 2001. Prior to joining ITLA Capital he was Senior Vice
President Chief Operating Officer Of First Bank of Beverly Hills from
1999 through 2001 and served in various senior management capacities
with First Bank since 1997. He has also held senior managerial
positions with First Los Angeles Bank and Western Federal Savings
Bank from 1990 through 1995.

Scott A. Wallaceis Managing Director  Chief Administrative Officer and
treasurer of ITLA Capital and the Bank since November 2001. He was previously
Deputy Managing Director and Chief Accounting Officer of ITLA Capital and the
Bank since September 1996. Prior to joining the Bank in September 1996, he was
Vice President  Finance of Westfield Corporation, Inc. in 1996 and was Vice
President  Controller of First Los Angeles Bank in 1995. From 1984 to 1994,
he was a senior manager with Kenneth Leventhal & Company.

Anthony A. Rusnakhas served as ITLA Capital and the Banks First Vice
President, General Counsel and Corporate Secretary since November 1997. Prior
to joining us, he was in private practice for seven years representing
financial institutions, businesses, corporations and individuals in business,
real estate transactions and litigation. Previously, he worked for law firms
in the San Diego area, as well as for San Diego Gas and Electrics corporate
in-house counsel.



76



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The directors of the Registrant, excluding Mr. Haligowski and Mr. Bruce,
are identified below.

Jeffrey L. Lipscomb, age 48, is an Investment Advisory Associate with AXA
Advisors and formerly was a Registered Principal and Assistant Manager of the
San Diego office of Equitable Financial Companies since 1986, handling
corporate group benefits and personal financial planning, and also was with
Kidder Peabody from 1983 to 1986.

Sandor X. Mayuga, age 54, is a member of the California State Bar and has
been a member of the law firm of Tisdale & Nicholson since 1994. He conducted
his own law practice from 1983 to 1994 and was a partner in the Financial
Institutions Department of Finley, Kumble, Wagner, Heine, Underberg, Manly &
Casey, a New York-based national law firm, from 1980 to 1983. Previously, he
served as Assistant General Counsel of Hunt-Wesson Foods, Inc., a subsidiary of
Norton Simon, Inc., and was associated with two large regional law firms in Los
Angeles County. Since 1980, Mr. Mayugas practice has focused on the
representation of financial institutions and other finance-related businesses
in corporate, transactional and regulatory matters.

Hirotaka Oribe, age 68, is a licensed architect with international
experience in real estate development and urban planning. Since 1993, Mr.
Oribe has served as an advisor to Kajima Development Resources, Inc. From 1979
to 1993, Mr. Oribe was Executive Vice President, Chief Operating Officer and a
Director of Kajima Development Corporation, a firm engaged in development and
construction of single-family and multi-family housing, office buildings,
retail space and land development. Mr. Oribe previously held other positions
with affiliates of Kajima Corporation of Japan from 1973 to 1979 and was a
practicing architect from 1962 to 1973.

Robert R. Reed, age 65, is retired from Household International where he
was employed in various positions from 1960 to 1992. Mr. Reed served as Vice
President of Household Bank from 1980 to 1992. Mr. Reed was previously
employed in management positions with Household Financial Corporation from 1962
to 1980.

Employees

As of December 31, 2001, we had 133 employees. Management believes that
its relations with employees are satisfactory. We are not subject to any
collective bargaining agreements.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires ITLA
Capitals directors and executive officers, and persons who own more than 10%
of a registered class of our equity securities, to file with the SEC initial
reports of ownership and reports of changes in ownership of common stock and
other equity securities of ITLA Capital. Officers, directors and greater than
10% stockholders are required by SEC regulation to furnish ITLA Capital with
copies of all Section 16(a) forms they file.

To our knowledge, based solely on a review of the copies of such reports
furnished to us and written representations that no other reports were
required, during the fiscal year ended December 31, 2001, all Section 16(a)
filing requirements applicable to its officers, directors and greater than 10%
beneficial owners were complied with.



77



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Item 11. Executive Compensation

The following table sets forth the compensation of the Chief Executive
Officer and the named executive officers of ITLA Capital with salary and bonus
greater than $100,000 for the year ended December 31, 2001.

|                            |                                   |      |      |      |  |     |                     |         |                        |        |         |         |        |  |              |        |       |  |         |         |  |   |        |        |    
|--------------------------- | --------------------------------- | ---- | ---- | ---- |  | --- | ------------------- | ------- | ---------------------- | ------ | ------- | ------- | ------ |  | ------------ | ------ | ----- |  | ------- | ------- |  | - | ------ | ------ | ---
|                            |                                   |      |      |      |  |     | Annual Compensation |         | Long-Term Compensation |        |         |         |       
|                            |                                   |      |      |      |  |     |                     |         |                        |        |         |         |       
|                            |                                   |      |      |      |  |     |                     |         |                        |        |         |         |        |  | Restricted   |        | All   |  | All    
|                            |                                   |      |      |      |  |     |                     |         |                        |        |         |         |        |  | Stock        |        | other |  | Other  
|                            |                                   |      |      |      |  |     | Salary              |         | Bonus                  |        | Option  |         | Awards |  | Compensation
|Name and Principal Position |                                   | Year |      | ($)  |  | ($) |                     | (#)(1)s |                        | ($)(8) |         | ($)    
|                            |                                   |      |      |      |  |     |                     |         |                        |        |         |        
|George W. Haligowski        |                                   |      | 2001 |      |  | $   | 397,515             |         |                        | $      | 457,125 | (2)     |        |  |             |        |       |  | 702,000 |         |  | $ | 78,761 | (3)   
|                            | Chairman of the Board, President  |      |      | 2000 |  |     | $                   | 396,249 |                        |        | $       | 582,125 | (2)    |  |              |       |       |  |         |        |  |   | $      | 76,255 | (3)
|                            | and Chief Executive Officer       |      |      | 1999 |  |     | $                   | 350,013 |                        |        | $       | 402,500 | (2)    |  |              | 10,000 |       |  |         | 114,327 |  |   | $      | 63,123 | (3)
|Norval L. Bruce             |                                   |      | 2001 |      |  | $   | 200,538             | (9)     |                        | $      | 96,502  | (9)     |        |  |             |        |       |  | 115,803 |         |  | $ | 17,069 | (4)   
|                            | Vice Chairman of the Board, Chief |      |      | 2000 |  |     | $                   | 192,064 | (9)                    |        | $       | 110,825 | (9)    |  |              | 5,000  |       |  |         |        |  |   | $      | 14,399 | (4)
|                            | Credit Officer                    |      |      | 1999 |  |     | $                   | 181,103 |                        |        | $       | 87,500  |        |  |              | 15,000 |       |  |         | 35,964  |  |   | $      | 8,991  | (4)
|Timothy M. Doyle            |                                   |      | 2001 |      |  | $   | 166,633             |         |                        | $      | 80,186  |         |        |  |             |        |       |  | 96,219  |         |  | $ | 11,700 | (5)   
|                            | Senior Managing Director and      |      |      | 2000 |  |     | $                   | 150,499 |                        |        | $       | 65,913  |        |  |              | 5,000  |       |  |         |        |  |   | $      | 11,519 | (5)
|                            | Chief Financial Officer           |      |      | 1999 |  |     | $                   | 131,429 |                        |        | $       | 63,500  |        |  |              | 15,000 |       |  |         | 26,100  |  |   | $      | 11,169 | (5)
|Steven C. Romelt            |                                   |      | 2001 |      |  | $   | 160,478             | (10)    |                        | $      | 76,657  | (10)    |        |  |             |        |       |  | 91,891  |         |  | $ | 17,896 | (6)   
|                            | Managing Director and Chief       |      |      | 2000 |  |     | $                   | 153,697 | (10)                   |        | $       | 72,660  | (10)   |  |              |       |       |  |         |        |  |   | $      | 14,805 | (6)
|                            | Lending Officer of Imperial       |      |      | 1999 |  |     | $                   | 144,975 |                        |        | $       | 84,000  |        |  |              | 10,000 |       |  |         | 28,764  |  |   | $      | 14,437 | (6)
|Don Nickbarg                |                                   |      | 2001 |      |  | $   | 130,946             |         |                        | $      | 62,550  |         |        |  | 10,000       |        |       |  | 18,765  |         |  | $ | 4,782  | (7)   
|                            | Senior Managing Director and      |      |      | 2000 |  |     | $                   | 118,533 |                        |        | $       | 33,000  |        |  |              | 9,000  |       |  |         |        |  |   | $      | 8,849  | (7)
|                            | Chief Operating Officer           |      |      | 1999 |  |     | $                   | 97,504  |                        |        | $       | 8,384   |        |  |              | 6,000  |       |  |         |        |  |   | $      | 2,516  | (7)



---

|(1)  |  | Options were granted on various dates and vest one-third on each of the
three subsequent anniversary dates of issuance.                                                                                                                                                                                                                                                                                                          
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|    
|    
|    
|(2)  |  | $200,000 of the 2001 bonus was deferred at the election of the named
executive officer under ITLA Capitals Nonqualified Deferred Compensation
plan. The respective amounts were none and $329,513 in 2000 and 1999.                                                                                                                                                                                                             
|    
|    
|    
|    
|(3)  |  | Consists of (a) $23,400 in auto related benefits, (b) $30,000 in
supplemental housing payments, (c) $6,950 in life insurance premiums, (d)
$5,100 in employer contributions to ITLA Capitals 401(k) plan and (e)
$12,501 in preferential interest on employee savings accounts in 2001.
The respective amounts were $23,400, $30,000, $7,760, $5,100 and $9,995 in
2000 and $4,685, $30,000, $7,553, $4,800 and $16,085 in 1999.
|    
|    
|    
|    
|(4)  |  | Consists of (a) $2,182 in auto related benefits, (b) $2,054 in life
insurance premiums, (c) $5,100 in employer contributions to ITLA Capitals
401(k) plan and (d) $7,733 in preferential interest on employee savings
accounts in 2001. The respective amounts were $2,182, $1,724, $5,100 and
$5,393 in 2000 and $2,139, $2,017, $4,800 and $35 in 1999.                                                                       
|    
|    
|    
|    
|(5)  |  | Consists of (a) $1,476 in auto related benefits, (b) $5,100 in employer
contributions to ITLA Capitals 401(k) plan and (c) $4,645 in life
insurance benefits in 2001. The respective amounts were $1,476, $5,100,
and $4,943 in 2000 and $1,476, $4,800 and $4,893 in 1999.                                                                                                                                                     
|    
|    
|    
|    
|(6)  |  | Consists of (a) $9,000 in auto related benefits, (b) $739 in life
insurance premiums, (c) none in employer contributions to ITLA Capitals
401(k) plan and (d) $8,157 in preferential interest on employee savings
accounts in 2001. The respective amounts were $9,000, $705, $5,100 and
$5,873 in 2000. The respective amounts were $9,000, $463, $4,800 and $174
in 1999.                                                     
|    
|    
|    
|    
|(7)  |  | Consists of (a) $1,440 in auto related benefits, (b) $2,880 in employer
contributions to ITLA Capitals 401(K) plan and (c) $378 in life insurance
benefits in 2001 and (d) $84 in preferential interest on employee savings
accounts in 2001. The respective amounts were $1,440, $4,546, $330 and
$2,523 in 2000 and none, $2,250, $266 and none in 1999.                                                                      
|    
|    
|    
|    
|(8)  |  | Includes ITLA Capital stock granted and allocated to the Long-Term
Supplemental Executive Retirement Plan under the Recognition and Retention
Plan previously approved by the shareholders.                                                                                                                                                                                                                                      
|    
|    
|    
|    
|(9)  |  | $100,269 of the 2001 salary
and $48,251 of the 2001 bonus was deferred at the election of the named executive officer under ITLA Capitals
Nonqualified Deferred Compensation plan. The respective amounts were
$46,124 and $85,636 in 2000.                                                                                                                                                                                     
|    
|    
|    
|    
|(10) |  | $155,938 of the 2001 salary and $71,188 of the 2001 bonus was deferred at
the election of the named executive officer under ITLA Capitals
Nonqualified Deferred Compensation plan. The respective amounts were none
and $61,770 in 2000.                                                                                                                                                                                        



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Agreements with Mr. Haligowski

We have entered into an employment agreement with Mr. Haligowski. The
employment agreement provides for an initial employment term of five years,
with the agreement automatically annually extending for an additional one-year
period each year unless either party provides the other with at least 90 days
notice of the non-extension or termination. The employment agreement provides
that we may terminate Mr. Haligowski for cause, as defined in the employment
agreement. In the event Mr. Haligowski is involuntarily terminated as defined
in the employment agreement, including following a change of control as defined
in the employment agreement, Mr. Haligowski will be entitled to receive during
the remaining term of the agreement his base salary calculated at the highest
annual rate during the three years prior to his involuntary termination and the
average amount of cash bonus and incentive compensation paid for the two years
prior to his involuntary termination, if any, the continuation of all
employment related benefits for the 60 months following the date of termination
and the immediate vesting of any stock options and restricted stock awards
previously granted and outstanding. As a result of a change of control, Mr.
Haligowski will also be retained as a consultant for an eighteen month period
following the change in control at a monthly consulting fee equal to 75% of his
base salary and an additional contribution to his account in our Supplemental
Executive Retirement Plan equal to 3.95 times his base salary. In addition,
the terms of the employment agreement shall be extended 60 months and stock
options and restricted stock awards previously granted and outstanding, salary
continuation plans, equity club memberships and other fringe benefits shall
immediately vest following a change of control. The annual base salary for Mr.
Haligowski under the employment agreement is currently $447,500 (which may be
increased from time to time by the Board of Directors). The employment
agreement also provides for, among other things, annual incentive compensation,
disability pay, participation in stock benefit and salary continuation plans,
and other fringe benefits, including a supplemental housing payment of not less
than $2,500 per month, an automobile allowance of not less than $1,950 per
month, and life insurance coverage in an amount not less than four times Mr.
Haligowskis annual salary. In addition we shall maintain health, dental and
life insurance benefits for the 60 months following an involuntary termination
and transfer title to our owned vehicle currently used by Mr. Haligowski. In
March 2000, we adopted a Salary Continuation Plan for the benefit of Mr.
Haligowski. Under the terms of this plan, Mr. Haligowski will be entitled to
receive monthly payments, based on 75% of his average monthly base salary for
the three years preceding the year in which the plan benefits become payable,
for a 15 year period. The benefits under the plan become payable on the
earlier of Mr. Haligowskis retirement upon reaching age 65, or his death,
disability, or involuntary termination (other than a termination for cause, as
defined in the agreement). If Mr. Haligowski voluntarily terminates his
employment prior to reaching age 65, the benefit payable to him under the plan
will be prorated based on the ratio of the actual period that he worked while
the plan is in effect to the scheduled period of time that he would have worked
if he had continued to work until reaching age 65. If we undergo a change of
control, the vesting of plan benefits accelerates and become payable monthly
over a ten-year period, with an increased monthly payment to reflect the
shorter payment period.

Change of Control Agreements

We have entered into change of control agreements with Messrs. Bruce,
Doyle, Romelt, Nickbarg and Wallace. The change in control agreements have
initial terms of one year and shall automatically extend for additional
one-year periods upon a change of control, as defined in the agreement, or upon
their anniversary date, unless either party provides the other with at least 90
days notice of termination. These agreements provide that in the event the
officer is involuntarily terminated within 24 months following a change of
control, as defined in the agreement, the officer shall be entitled to receive
upon such termination an amount equal to the greater of the annualized salary
as in effect on the date of the change of control or the date of termination
for a period of up to 18 months and a pro rata portion of his bonus from the
previous year. In addition we will maintain health, dental and life insurance
benefits for up to the next 18 months for each officer and transfer title to
our owned vehicle currently used by the officer or, in the event the officer
receives a monthly cash car allowance in lieu of the use of our vehicle, we
shall pay an amount equal to up to 18 times the monthly allowance. Stock
options and restricted stock awards previously granted and outstanding will
also immediately vest. The annual base salary for Messrs. Bruce, Doyle, Romelt
and Nickbarg is currently $219,000, $182,000, $175,000 and $166,000,
respectively.

Both Mr. Haligowskis employment agreement and the change of control
agreements also provide that to the extent any payments made may be considered
excess parachute payments under Section 280G of the Internal



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Revenue Code that are subject to excise tax, we will pay an additional
amount needed to insure that the amount of payments and value of benefits
received equals the same amount in the absence of any excise tax.

Supplemental Executive Retirement Plan (SERP)

The SERP provides that the compensation committee may make restricted
stock awards under ITLA Capitals Recognition and Retention Plan (RRP) on a tax
deferred basis through the SERP. The SERP further provides that Mr. Haligowski
shall receive an allocation annually, subject to the performance terms of the
RRP, of a restricted stock award equal to one-third of his base salary and all
other participants shall receive an award equal to one-fifth of base salary
subject to the approval of the compensation committee, which may also allocate
a greater or lesser award or no award in its discretion. For this purpose,
each share of common stock has been valued at $9.00 per share, the fair market
value of the common stock on the date of issuance to the SERP. A participant
shall only have a vested right to amounts allocated to his or her account if
the participant is employed on the last day of a three year vesting cycle or
earlier at the discretion of the compensation committee. Upon a change in
control (as defined in the SERP), the participant shall have an accelerated
vesting of all shares allocated to his or her account. The participant shall
only have a right to vested shares in his or her account upon normal
retirement, death, disability or termination. The last day of the next vesting
cycle for shares allocated to the SERP accounts for the benefit of the
participants for the years 2001, 2002 and 2003 is December 31, 2003. For
additional discussion, please see Benefits  Recognition and Retention Plan.

Benefits

Insurance Plans.All full-time employees, after approximately three
months employment with us, are covered under group plans providing major
medical, dental, and vision benefits, and long-term disability, travel
accident, accidental death and dismemberment insurance, and group term life
insurance.

Salary Savings Plan.The ITLA Capital Salary Savings Plan is a cash or
deferred arrangement under Section 401(k) of the Internal Revenue Code (the
Code) designed to provide employees with the opportunity to accumulate
retirement funds (the 401(k) Plan). Permanent employees age 21 or older are
eligible to participate in the 401(k) Plan as of January 1 or July 1 first
following their hire date. Under the 401(k) Plan, subject to limitations
imposed under Section 401(k) and Section 415 of the Code, a participant may
elect to defer on a monthly basis up to 15% of compensation by directing us to
contribute such amount to the 401(k) Plan on such employees behalf. We
currently make matching contributions to the 401(k) Plan equal to 50% of the
first 6% of the participants monthly contribution. The Board reviews the
match on an annual basis, and we may also make discretionary contributions to
the 401(k) Plan. Compensation for purposes of the 401(k) Plan is defined as
a participants compensation from us as reported annually on Form W-2,
including contributions to the 401(k) Plan by the employee, and contributions
by us in the employees behalf to any other pension, insurance, welfare or
other employee benefit plan. Under the 401(k) Plan, a separate account is
established for each participant. Participants are always 100% vested in their
contributions and the earnings thereon. Participants become vested in employer
contributions and the earnings thereon at the rate of 20% per year commencing
with the first full year of service (defined as completion of 12 consecutive
months of work). Participants become fully vested in employer contributions
and the earnings thereon on their fifth anniversary of employment, or in the
event of death, permanent disability or attainment of age 65 while employed by
us. The 401(k) Plan provides for in-service hardship distributions of elective
deferrals, as well as loans of a portion of vested account balances.
Distributions from the 401(k) Plan are made upon termination of service in a
lump sum or in annual installments over a period of years at the election of
the participant with the right to take a lump sum payment at any time during
such period.

Nonqualified Deferred Compensation Plans. The ITLA Capital Corporation
Supplemental Salary Savings Plan (the Supplemental Plan) and Nonqualified
Deferred Compensation Plan (the Deferral Plan) are designed to provide
additional retirement benefits for certain officers and highly compensated
employees. The Supplemental Plan provides participating employees with an
opportunity to make up benefits not available under the 401(k) Plan due to any
application of limitations on compensation and maximum benefits under the
401(k) Plan. Benefits under the Supplemental Plan are provided at the same
time and in the same form as benefits under the 401(k) Plan, and become taxable
to the participant at that point. The Deferral Plan allows a participant to
defer receipt of, and current taxation upon, designated portions of the
participants direct cash compensation until a future date specified by the



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participant. Both of these plans are unfunded plans, meaning that all benefits
payable thereunder are payable from our general assets, and funds available to
pay benefits are subject to the claims of our general creditors. We have
established a Rabbi Trust with a third party FDIC insured financial institution
which holds the contributions to the Supplemental Plan and Deferral Plan, for
the purpose of providing the benefits set forth under the terms of the plans.
Participants only have the rights of unsecured creditors with respect to the
Rabbi Trust assets.

Stock Plans. We have adopted the 1995 Employee Stock Incentive Plan and
the 1995 Stock Option Plan for Nonemployee Directors (collectively, the Stock
Option Plan) pursuant to which officers, directors and our employees are
eligible to receive options to purchase Common Stock. The purpose of the Stock
Option Plan is to enable us to attract, retain and motivate employees by
providing for or increasing their proprietary interests in ITLA Capital, and in
the case of nonemployee directors, to attract such directors and further align
their interests with our interests. Every one of our employees is eligible to
be considered for the grant of awards under the Stock Option Plan. An
amendment to the Stock Plan increasing the number of shares authorized for
awards under the Stock Plan by 311,500 shares was approved by the companys
shareholders on June 29, 2001. The maximum number of shares of Common Stock
that may be issued pursuant to awards granted under the Stock Option Plan is
1,311,500 shares of which a maximum of 550,000 shares may be awarded during the
first year of the Stock Option Plan, with annual awards thereafter limited to
100,000 additional shares during each of the next five years of the Stock
Option Plan (with the shares subject to the Stock Option Plan and all grants
thereunder being subject to adjustments to prevent dilution).

The Stock Option Plan is administered by the Compensation Committee of the
Board of Directors, except that grants to nonemployee directors are made by the
Board of Directors pursuant to a predetermined formula, as described below.
The Committee consists of two or more nonemployee directors of ITLA Capital,
and has full and final authority to select the employees to receive awards and
to grant such awards. Subject to provisions of the Stock Option Plan, the
Committee has a wide degree of flexibility in determining the terms and
conditions of awards and the number of shares to be issued pursuant thereto.
The expenses of administering the Stock Option Plan are borne by us.

The Stock Option Plan authorizes the Committee to enter into any type of
arrangement with an eligible employee that, by its terms, involves or might
involve the issuance of Common Stock or any other security or benefit with a
value derived from the value of Common Stock. Awards to employees are not
restricted to any specified form or structure. Stock options to purchase 5,000
shares of Common Stock were automatically granted to the nonemployee directors
upon the completion of our initial public offering and upon their election to
the Board of Directors, and options to purchase an additional 1,000 shares are
granted annually for the following five years, provided such individuals
continue to serve as directors.

Awards may not be granted under the Stock Option Plan after the tenth
anniversary of the adoption of the Stock Option Plan. We have granted an
aggregate of 1,232,000 options under the Stock Option Plan, of which 360,000
have been granted to Mr. Haligowski, 95,000, 60,000, 50,000 and 25,000 have
been granted to Messrs. Bruce, Doyle, Romelt and Nickbarg, respectively, 40,000
have been granted to non-employee directors, and 610,000 have been granted to
other employees, of which 92,749 have been exercised and 325,001 have been
forfeited. The exercise price per share of the options so granted ranges from
$10.00 to $19.37 per share and will generally vest 33-1/3% per year, beginning
with the first anniversary of the date of the grant.

Recognition and Retention Plan. We have adopted the Recognition and
Retention Plan (RRP), the purpose of which is to promote our long-term
interests and our shareholders by providing a means for attracting and
retaining officers and employees of ITLA Capital and its affiliates. Under the
RRP, awards of restricted shares of our common stock may be made to employees
as additional long-term incentive compensation. Every one of our employees is
eligible to be considered for the grant of awards under the RRP. The maximum
number of shares of common stock which may be issued pursuant to the RRP is
300,000 shares over the ten year life of the plan. No RRP shares may be
granted in any fiscal year in which the Bank fails to maintain an adequately
capitalized designation under the FDIC regulations and ITLA Capital fails to
achieve a return on average assets of at least 50 basis points for the fiscal
year. The RRP was approved by the shareholders and is administered by the
Compensation Committee of the Board of Directors which has a wide degree of
flexibility, within the provisions of the RRP, in



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determining the terms and conditions of awards and the number of shares to be
issued pursuant thereto. The RRP shares granted to date have been allocated
through the Supplemental Executive Retirement Plan as discussed above.

Directors Compensation

Directors Fees. Each non-employee director was paid a monthly fee during
2001 of $1,800 for serving on our Board of Directors. Each non-employee
director is paid $500 for each Board or Committee meeting attended for service
on such committee.

Voluntary Retainer Stock and Deferred Compensation Plan. In 1996, we
adopted the Voluntary Retainer Stock and Deferred Compensation Plan for Outside
Directors (the Outside Director Plan). The Outside Director Plan provides
for the deferral of compensation earned by non-employee directors in the form
of Stock Units (Stock Units) in a Stock Unit account (Stock Unit Account).
Directors may elect to have up to 100% of their fees converted into stock
units.

For dividends paid with respect to our common stock, each non-employee
director has credited to his Stock Unit Account an additional number of Stock
Units in an amount determined under the Outside Director Plan. Each
non-employee directors Stock Unit Account will be settled by delivering to the
non-employee director (or his beneficiary) the number of shares of our common
stock equal to the number of whole Stock Units then credited to the
non-employee directors Stock Unit Account, in either (i) a lump sum or (ii)
substantially equal annual installments over a period not to exceed ten years.

Directors Stock Option Plans. Directors are also eligible to receive
stock option grants as described above.

Compensation Committee Interlocks and Insider Participation

During 2001, the Compensation Committee was comprised of Directors
Lipscomb and Oribe.

Option Grants for 2001

The following table sets forth certain information regarding stock options
granted pursuant to the Stock Option Plan for the named executive officers in
2001. No stock appreciation rights have been granted pursuant to the Stock
Option Plan.

|                                        |  |                   |        |            |  |            |      |                      |  |     |       |             |  |                        |            |                       |  |                  |         |  |  |  |         | 
|--------------------------------------- |  | ----------------- | ------ | ---------- |  | ---------- | ---- | -------------------- |  | --- | ----- | ----------- |  | ---------------------- | ---------- | --------------------- |  | ---------------- | ------- |  |  |  | ------- | 
|Stock Option Grants in Last Fiscal Year
|                                       
|                                        |  | Individual Grants |        |            |  |            |      |                      |  |     |       |             |  |                       
|                                        |  |                   |        |            |  |            |      | Potential Realizable
|                                        |  |                   |        |            |  |            |      |                      |  |     |       |             |  |                        |            |                       |  | Value of Assumed
|                                        |  |                   |        |            |  | % of Total |      |                      |  |     |       |             |  |                        |            | Annual Rates of Stock
|                                        |  | Number of         |        | Options    |  |            |      |                      |  |     |       |             |  | Price Appreciation for
|                                        |  | Underlying        |        | Granted to |  | Exercise   |      |                      |  |     |       | Option Term
|                                        |  | Options           |        | Employees  |  | or Base    |      |                      |  |     |       |            
|                                        |  | Granted           |        | in Fiscal  |  | Price      |      | Expiration           |  | 5%  |       | 10%        
|Name                                    |  | (#)               |        | Year       |  | ($/Share)  |      | Date                 |  | ($) |       | ($)        
|                                        |  |                   |        |            |  |            |      |                      |  |     |       |            
|George W. Haligowski                    |  |                   |       |            |  |            |     |                      |  |     |      |             |  |                        |           |                       |  |                  |        |  |  |  |        | 
|Norval L. Bruce                         |  |                   |       |            |  |            |     |                      |  |     |      |             |  |                        |           |                       |  |                  |        |  |  |  |        | 
|Timothy M. Doyle                        |  |                   |       |            |  |            |     |                      |  |     |      |             |  |                        |           |                       |  |                  |        |  |  |  |        | 
|Steven C. Romelt                        |  |                   |       |            |  |            |     |                      |  |     |      |             |  |                        |           |                       |  |                  |        |  |  |  |        | 
|Don Nickbarg                            |  |                   | 10,000 |            |  |            | 12.7 |                      |  |     | 16.21 |             |  |                        | 05/09/2011 |                       |  |                  | 101,944 |  |  |  | 258,346 | 



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The following table sets forth certain information concerning the number
and value of stock options at December 31, 2001 held by the named executive
officers.

|                                   |  |             |   |          |  |             |     |                |  |                                        |         |                        |  |  |        |  |  |                      |           |  |  |  |         | 
|---------------------------------- |  | ----------- | - | -------- |  | ----------- | --- | -------------- |  | -------------------------------------- | ------- | ---------------------- |  |  | ------ |  |  | -------------------- | --------- |  |  |  | ------- | 
|Option
Values at December 31, 2001
|                                   |  |             |   |          |  |             |     |                |  |                                        |         |                        |  |  |        |  |  | Value of Unexercised
|                                   |  |             |   |          |  |             |     |                |  | Number of Unexercised Option at Fiscal |         | "In-the-Money" Options
|                                   |  |             |   |          |  |             |     |                |  | Year-End                               |         | at Fiscal Year-End (1)
|                                   |  |             |   |          |  |             |     |                |  |                                        |         |                       
|                                   |  | Shares      |   |          |  |             |     | (#)            |  | ($)                                   
|                                   |  | Acquired on |   | Value    |  |             |     |                |  |                                        |         |                        |  |  |        |  |  |                      |           | 
|                                   |  | Exercise    |   | Realized |  |             |     |                |  |                                        |         |                        |  |  |        |  |  | Un-                 
|Name                               |  | (#)         |   | ($)      |  | Exercisable |     | Un-exercisable |  | Exercisable                            |         | exercisable           
|                                   |  |             |   |          |  |             |     |                |  |                                        |         |                       
|George W. Haligowski               |  |             |  |          |  |             | n/a |                |  |                                        | 356,667 |                        |  |  | 3,333  |  |  |                      | 3,432,402 |  |  |  | 23,198  | 
|Norval L. Bruce                    |  |             |  |          |  |             | n/a |                |  |                                        | 86,667  |                        |  |  | 8,333  |  |  |                      | 645,703   |  |  |  | 67,997  | 
|Timothy M. Doyle                   |  |             |  |          |  |             | n/a |                |  |                                        | 51,667  |                        |  |  | 8,333  |  |  |                      | 291,428   |  |  |  | 67,997  | 
|Steven C. Romelt                   |  |             |  |          |  |             | n/a |                |  |                                        | 46,667  |                        |  |  | 3,333  |  |  |                      | 252,302   |  |  |  | 23,198  | 
|Don Nickbarg                       |  |             |  |          |  |             | n/a |                |  |                                        | 7,000   |                        |  |  | 18,000 |  |  |                      | 54,386    |  |  |  | 114,514 | 



---

|(1) |  | The difference between the aggregate option exercise price and the
closing price of $20.96 of the underlying shares at December 31, 2001.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------






|Item 12. | Security Ownership of Certain Beneficial Owners and Management
|-------- | --------------------------------------------------------------

At March 22, 2002, we had 5,805,292 shares of common stock outstanding.

The following table sets forth, as of March 22, 2002, certain information
as to those persons who were known by management to be beneficial owners of
more than five percent of our common stock outstanding.

|                                                                                                        |  |                           |         |                  |  |  |       |  
|------------------------------------------------------------------------------------------------------- |  | ------------------------- | ------- | ---------------- |  |  | ----- | -
|Beneficial Owner                                                                                        |  | Shares Beneficially Owned |         | Percent of Class
|                                                                                                        |  |                           |         |                 
|Franklin Mutual Advisors, Inc.
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078                 |  |                           | 689,000 | (1)              |  |  | 11.87 | %
|Wellington Management Company, LLP
75 State Street
Boston, Massachusetts 02109                          |  |                           | 642,500 | (2)              |  |  | 11.07 | %
|T. Rowe Price Associates, Inc.
100 E. Pratt Street
Baltimore, Maryland 21202                            |  |                           | 610,850 | (3)              |  |  | 10.52 | %
|Thomson Horstmann & Bryant, Inc.
Park 80 West, Plaza Two
Saddle Brook, New Jersey 07663                 |  |                           | 570,050 | (4)              |  |  | 9.82  | %
|Dimensional Fund Advisors
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401                  |  |                           | 560,200 | (5)              |  |  | 9.65  | %
|George W. Haligowski
888 Prospect Street, Suite 110
La Jolla, California 92037                          |  |                           | 504,399 | (6)              |  |  | 8.18  | %
|Eubel Brady & Suttman Asset Management Inc.
7777 Washington Village Drive, Suite 210
Dayton, Ohio 45459 |  |                           | 322,720 | (7)              |  |  | 5.56  | %
|Friedman, Billings, Ramsey Group, Inc.
1001 19th Street North
Arlington, Virginia 22209                 |  |                           | 299,956 | (8)              |  |  | 5.17  | %



83



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---

|(1) |  | As reported by Franklin Resources, Inc. (Franklin) on a Schedule 13G/A
filed on or about January 18, 2000 with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended.
Franklin reported sole voting and dispositive powers as to 689,000 shares,
and shared voting and dispositive powers as to none of the 689,000 shares
covered by the report.                                                          
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | As reported by Wellington Management LLP (Wellington) on a Schedule
13G/A filed on or about February 14, 2001 with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended.
Wellington reported sole voting and dispositive powers as to no shares,
shared voting power as to 410,600 shares, and shared dispositive power as
to 642,500 of the 642,500 shares covered by the report.                        
|   
|   
|   
|   
|(3) |  | As reported by T. Rowe Price Associates, Inc. (Price Associates) on a
schedule 13G dated on or about February 14, 2002 and filed with the
Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended. Price Associates reported sole voting power as to
193,400 shares, sole dispositive power as to 610,850 shares, and shared
voting and dispositive power as to none of the 610,850 shares covered by
the report.
|   
|   
|   
|   
|(4) |  | As reported by Thomson Horstmann & Bryant, Inc. (Thomson) on a Schedule
13G/A filed on or about January 18, 2002 with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended. Thomson
reported sole voting power as to 253,600 shares, sole dispositive power as
to 570,050 shares, shared voting and dispositive power as to none of the
570,050 shares covered by the report.                             
|   
|   
|   
|   
|(5) |  | As reported by Dimensional Fund Advisors (Dimensional) on a Schedule
13G/A dated on or about January 30, 2002 and filed with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended.
Dimensional reported sole voting and dispositive powers as to 560,200
shares, and shared voting and dispositive powers as to none of the 560,200
shares covered by the report.                                         
|   
|   
|   
|   
|(6) |  | Includes 360,000 shares underlying stock options which are currently
exercisable or which will become exercisable within 60 days of March 22,
2002.                                                                                                                                                                                                                                                                                                 
|   
|   
|   
|   
|(7) |  | As reported by Eubel Brady and Suttman Asset Management, Inc. (Suttman)
on a Schedule 13G/A filed on or about February 14, 2002 with the
Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended. Brady reported sole voting and dispositive power as to
none of the 322,720 shares, and shared voting and dispositive power as to
322,720 shares of the 322,720 shares covered by the report.                   
|   
|   
|   
|   
|(8) |  | As reported by Friedman, Billings, Ramsey Group, Inc. (FBR) on a
Schedule 13G/A filed on or about February 13, 2002 with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended.
FBR reported sole voting and dispositive powers as to 299,956 shares, and
shared voting and dispositive powers as to none of the 299,956 shares
covered by the report.                                                     



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The following table sets forth, as of March 22, 2002, certain information
as to the shares of common stock beneficially owned by the directors and named
executive officers and by all directors and executive officers of ITLA Capital
as a group.

|                                                             |  |              |         |            |  |  |       |  
|------------------------------------------------------------ |  | ------------ | ------- | ---------- |  |  | ----- | -
|                                                             |  | Shares       |         |            |  | 
|                                                             |  | Beneficially |         |            |  | 
|                                                             |  | Owned        |         | Percent of
|Beneficial Owner                                             |  | (1)          |         | Class     
|                                                             |  |              |         |           
|George W. Haligowski                                         |  |              | 504,399 |            |  |  | 8.18  | %
|Norval L. Bruce                                              |  |              | 119,501 |            |  |  | 2.03  | %
|Timothy M. Doyle                                             |  |              | 77,385  |            |  |  | 1.32  | %
|Steven C. Romelt                                             |  |              | 69,435  |            |  |  | 1.19  | %
|Don Nickbarg                                                 |  |              | 15,333  |            |  |  | 0.26  | %
|Sandor X. Mayuga                                             |  |              | 10,800  |            |  |  | 0.19  | %
|Jeffrey L. Lipscomb                                          |  |              | 10,400  |            |  |  | 0.18  | %
|Hirotaka Oribe                                               |  |              | 10,200  |            |  |  | 0.18  | %
|Robert R. Reed                                               |  |              | 10,200  |            |  |  | 0.18  | %
|All Directors and Executive
Officers as a Group (12
Persons) |  |              | 878,654 |            |  |  | 13.57 | %



---

|(1) |  | Includes shares held
directly, as well as an aggregate of 668,002 shares
which are subject to immediately exercisable options and options
exercisable within 60 days of March 22, 2002, under ITLA Capitals Stock
Option Plan, vested shares held by the SERP, and shares held in retirement
accounts or by certain members of the named individuals families or
corporations for which an individual is an officer or director or held by
trust of which an individual is trustee or a substantial beneficiary, over
which shares the individual may be deemed to have sole or shared voting
and/or dispositive power. The above named individuals held exercisable
options and options exercisable within 60 days of March 22,
2002 as
follows: Chairman Haligowski  360,000 shares; Director Lipscomb  10,000
shares; Director Mayuga  10,000 shares; Director Oribe  10,000 shares;
Director Reed  10,000 shares; Norval L. Bruce  93,334 shares; Timothy M.
Doyle  58,334 shares; Don Nickbarg  15,333 shares and Steven C. Romelt  50,000 shares.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Item 13. Certain Relationships and Related Transactions

During the year, we utilized the services of Tisdale & Nicholson.
Director Mayuga is a partner in that law firm. During 2001, this law firm
received $48,320 in legal fees from ITLA Capital, which was not in excess of 5%
of the firms total revenues for the year.

During the year, we utilized the services of a public relations firm which
is owned by Director Lipscombs spouse. During 2001, this public relations
firm received $36,508 in fees from ITLA Capital.



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PART IV






|Item 14. | Exhibits, Financial Statement Schedules and Reports on Form 8-K
|-------- | ---------------------------------------------------------------

(a)(1) Financial Statements:

| |                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our consolidated financial statements, and Report of Independent
Public Accountants thereon, are included in this Form 10-K at the
pages listed below:

|                                                                                                               |  |      |    | 
|-------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                               |  | Page
|                                                                                                               |  |     
|Report of Independent Public Accountants                                                                       |  |      | 39 | 
|Consolidated Balance Sheets as of December 31, 2001 and 2000                                                   |  |      | 40 | 
|Consolidated Statements of Income for the Years Ended
December 31, 2001, 2000 and 1999                         |  |      | 41 | 
|Consolidated Statements of Changes in Shareholders Equity for the
Period January 1, 1999 to December 31, 2001 |  |      | 42 | 
|Consolidated Statements of Cash Flows for the Years Ended
December 31, 2001, 2000 and 1999                     |  |      | 43 | 
|Notes to Consolidated Financial Statements                                                                     |  |      | 44 | 

(a)(2) Financial Statement Schedules:

| |                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | All financial statement schedules have been omitted as the required
information is inapplicable or has been included in the Notes to
Consolidated Financial Statements.



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(a)(3) Exhibits:

|           |  |                                                                               |  |             
|---------- |  | ----------------------------------------------------------------------------- |  | ------------
|           |  |                                                                               |  | Reference   
|           |  |                                                                               |  | to Prior    
|           |  |                                                                               |  | Filling or  
|Regulation |  |                                                                               |  | Exhibit     
|S-K        |  |                                                                               |  | Number      
|Exhibit    |  |                                                                               |  | Attached    
|Number     |  | Document                                                                      |  | Hereto      
|           |  |                                                                               |  |             
|3.1        |  | Certificate of Incorporation, as amended                                      |  | **          
|3.2        |  | Bylaws, as amended                                                            |  | **          
|4          |  | Instruments Defining the Rights of Security Holders, Including Indentures     |  | None        
|9          |  | Voting Trust Agreement                                                        |  | None        
|10.1       |  | 1995 Stock Option Plan For Nonemployee Directors                              |  | *           
|10.2       |  | 1995 Employee Stock Incentive Plan                                            |  | *           
|10.3       |  | Nonqualified Deferred Compensation Plan                                       |  | ***         
|10.4       |  | Supplemental Salary Savings Plan                                              |  | *           
|10.5       |  | Glendale Headquarters Lease Agreement                                         |  | *           
|10.6       |  | Data Processing Agreement                                                     |  | *           
|10.7       |  | Employment Agreement with George W. Haligowski                                |  | *           
|10.8       |  | Change of Control Agreements                                                  |  | ***         
|10.9       |  | Recognition and Retention Plan                                                |  | **          
|10.10      |  | Voluntary
Retainer Stock and Deferred Compensation Plan for Outside Directors |  | **          
|10.11      |  | Supplemental Executive Retirement Plan                                        |  | ***         
|10.12      |  | ITLA Capital Corporation Rabbi Trust Agreement                                |  | ***         
|10.13      |  | Salary Continuation Plan                                                      |  | ****        
|11         |  | Statement Regarding Computation of Per Share Earnings                         |  | None        
|12         |  | Statement Regarding Computation of Ratios                                     |  | None        
|13         |  | Annual Report to Security Holders                                             |  | Not required
|18         |  | Letter Regarding Change in Accounting Principles                              |  | None        
|21         |  | Subsidiaries of the Registrant                                                |  | 21          
|22         |  | Published Report
Regarding Matters Submitted to Vote of Security Holders      |  | None        
|23         |  | Consent of Independent Certified Public Accountants                           |  | 23          
|24         |  | Power of Attorney                                                             |  | Not required
|28         |  | Information from
Reports Furnished to State Insurance Regulatory Authorities  |  | None        
|99         |  | Confirmation of
Receipt of Assurances from Arthur Andersen LLP                |  | 99          



---

|*    |  | Filed as exhibits to Imperials Registration Statement on Form
S-1 (File No. 33-96518) filed with the
Commission on September 1, 1995, pursuant to Section 5 of the
Securities Act of 1933.
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|    
|    
|    
|**   |  | Filed as exhibits to the Companys Registration Statement on
Form S-4 (File No. 333-03551) filed with the
Commission on May 10, 1996, pursuant to Section 5 of the Securities
Act of 1933. 
|    
|    
|    
|    
|***  |  | Previously filed on Registrants Form 10-K for the year ended
December 31, 1999.                                                                                                           
|    
|    
|    
|    
|**** |  | Previously filed on
Registrants Form 10-K for the year ended December 31, 2000.                                                                                                           



87



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

|                    |                                                                                                                   |                         
|------------------- | ----------------------------------------------------------------------------------------------------------------- | ------------------------
|                    | ITLA CAPITAL CORPORATION                                                                                         
|                   
|Date: April 1, 2001 | By:                                                                                                               | /s/ George W. Haligowski
|                    |                                                                                                                  
|                    | George W. Haligowski
Chairman of the Board, President
and Chief Executive Officer(Duly Authorized Representative)

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated.

|                                              |  |                                                                                                   |  |              
|--------------------------------------------- |  | ------------------------------------------------------------------------------------------------- |  | -------------
|Signature                                     |  | Title                                                                                             |  | Date         
|                                              |  |                                                                                                   |  |              
|/s/ George W. Haligowski
George W. Haligowski |  | Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer)        |  | April 1, 2001
|                                             
|/s/ Timothy M. Doyle
Timothy M. Doyle         |  | Senior Managing Director and
Chief Financial Officer
(Principal Financial and Accounting Officer) |  | April 1, 2001
|                                             
|/s/ Norval L. Bruce
Norval L. Bruce           |  | Director                                                                                          |  | April 1, 2001
|                                             
|/s/ Jeffrey L. Lipscomb
Jeffrey L. Lipscomb   |  | Director                                                                                          |  | April 1, 2001
|                                             
|/s/ Sandor X. Mayuga
Sandor X. Mayuga         |  | Director                                                                                          |  | April 1, 2001
|                                             
|/s/ Robert R. Reed
Robert R. Reed             |  | Director                                                                                          |  | April 1, 2001
|                                             
|/s/ Hirotaka Oribe
Hirotaka Oribe             |  | Director                                                                                          |  | April 1, 2001



88